-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DG0JiKoDiGmZi8RX5FT9v1/GN1cljeXuQBd9CjIlOZxdJdgNReNjWMumw5q5fHlI FGJUPXEGr1T27Ai/NnJmRg== 0001047469-04-028262.txt : 20040908 0001047469-04-028262.hdr.sgml : 20040908 20040908172837 ACCESSION NUMBER: 0001047469-04-028262 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040908 DATE AS OF CHANGE: 20040908 EFFECTIVENESS DATE: 20040908 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACIFIC GLOBAL FUND INC CENTRAL INDEX KEY: 0000890206 IRS NUMBER: 954393390 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-07062 FILM NUMBER: 041021340 BUSINESS ADDRESS: STREET 1: 206 N JACKSON STREET STREET 2: SUITE 301 CITY: GLENDALE STATE: CA ZIP: 91206 BUSINESS PHONE: 8182426693 MAIL ADDRESS: STREET 1: 206 NORTH JACKSON STREET SUITE 201 CITY: GLENDALE STATE: CA ZIP: 91206 N-CSRS 1 a2143002zn-csrs.txt N-CSRS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-7062 PACIFIC GLOBAL FUND INC. D/B/A PACIFIC ADVISORS FUND INC. (Exact name of registrant as specified in charter) 206 NORTH JACKSON STREET, SUITE 301 GLENDALE, CALIFORNIA 91206 (Address of principal executive offices) GEORGE A. HENNING 206 N. JACKSON ST., SUITE 301 GLENDALE, CA 91206 (Name and address of agent for service) Registrant's telephone number, including area code: 818-242-6693 Date of fiscal year end: DECEMBER 31 Date of reporting period: JUNE 30, 2004 Item 1. Report to Shareholders (filed herewith). [PACIFIC ADVISORS FUND INC. LOGO] SEMI-ANNUAL REPORT JUNE 30, 2004 [GRAPHIC] GOVERNMENT SECURITIES FUND INCOME AND EQUITY FUND BALANCED FUND GROWTH FUND MULTI-CAP VALUE FUND SMALL CAP FUND PACIFIC ADVISORS TABLE OF CONTENTS MESSAGE FROM THE CHAIRMAN 1 GOVERNMENT SECURITIES FUND 3 INCOME AND EQUITY FUND 5 BALANCED FUND 7 GROWTH FUND 10 MULTI-CAP VALUE FUND 12 SMALL CAP FUND 14 SCHEDULE OF INVESTMENTS 18 STATEMENT OF ASSETS AND LIABILITIES 36 STATEMENT OF OPERATIONS 38 STATEMENT OF CHANGES IN NET ASSETS 40 NOTES TO FINANCIAL STATEMENTS 44 FINANCIAL HIGHLIGHTS 49
This Report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The statements in the Report are the opinions and beliefs expressed at the time of this commentary and are not intended to represent opinions and beliefs at any other time. These opinions are subject to change with market conditions and are not meant as a market forecast. All economic and performance information referenced is historical. Past performance does not guarantee future results. For more information on the Pacific Advisors Funds, including information on charges, expenses and other classes offered, please obtain a copy of the prospectus by calling (800) 989-6693. Please read the prospectus carefully before you invest or send money. Shares of the Pacific Advisors Funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. [GRAPHIC] MESSAGE FROM THE CHAIRMAN Fellow Shareholders, For many investors, the daily news and business reports have provided more questions than answers during the past few months. Analysts continue to debate such issues as the strength of the economy, job growth, interest rates, the impact of rising energy prices on inflation, a bull vs. bear market, and the Presidential election. Geopolitical events have also contributed to the volatility in the fixed income and equity markets. While all of these issues are significant and important, they often make it difficult to evaluate investment opportunities. During the first six months of the year, the economy continued to grow above 3%. Corporate profits were substantially higher across most sectors including basic materials such as lumber, cement, steel, oil and gas. This has been the broadest based economic recovery in recent U.S. history. Job creation has also grown with this economic recovery. Technology and productivity improvements have enabled corporations to grow profits at an impressive pace. There has been concern that profit growth will slow, but that is not unexpected. Profit growth often slows in the second year of an economic recovery, but many companies will still have healthy year-over-year growth rates above 10%. The economic recovery is real and, with modest growth rates, it should be sustainable for some time. Interest rates and the equity indices have been trading range bound. Historically, equity markets often stay in a trading range for several years following a lengthy bull market such as the one that ended in 2000. It is possible that the markets will experience a series of rallies and corrections without the emergence of a real bull or bear market. As a result, the equity market indices may remain relatively flat for the foreseeable future. During this period, however, individual stocks may continue to perform quite well. A successful investment strategy in these market conditions places a premium on INDIVIDUAL STOCK SELECTION WITH A MORE LIMITED NUMBER OF PORTFOLIO HOLDINGS. Despite the impact of energy prices, geopolitical events and interest rate increases, we believe there will be good investment opportunities in the equity markets. We anticipate that market volatility will continue to provide opportunities to buy and sell stocks at attractive prices as the markets overreact to positive and negative events. We anticipate interest rates will continue to rise over the next year. As the economy grows, the Federal Reserve will continue to raise rates to control inflation. Long-term interest rates are currently at 4 1/2%. They will continue to rise and are expected to peak between 5 1/2% and 6%. During this phase of rising interest rates, we believe it is more important to protect principal than seek higher yields. Our fixed income portfolios have employed a more defensive investment strategy by holding shorter-term bonds that will be replaced with higher yielding bonds once interest rates near their peak in this cycle. A further explanation of our fixed income strategy is provided in the interviews with the portfolio managers for each Fund. The abundant availability of business news in the media has created a tendency to micro-analyze individual events rather than focus on broader economic trends. There is no question that the instantaneous availability of news has created more volatility in the markets. Investment strategies must remain disciplined and patient but adapt to changing market conditions. This is the investment strategy employed by Pacific Advisors Funds and we believe it has enabled our Funds to perform well through different market cycles. We are pleased to report that our Growth and Small Cap Funds performed at the top of their peer groups and outperformed market indices over the last year(1). 1 [GRAPHIC] We continue to believe that it is important for our shareholders to have an asset allocation program tailored to their investment objectives. In any asset allocation plan, there will be certain investments that will outperform others at a given point in the market cycle. There is a tendency among investors to become impatient and abandon their diversification strategy when certain investments are not performing as well as others. Some investors seek safety in cash while others may concentrate their investments in the current best performing sectors. This investment approach often leaves investors behind. When markets shift, they are unable to adapt quickly to changing market conditions. An effective asset allocation plan helps investors manage through difficult markets while creating opportunities for solid long-term performance. We encourage you to consult with your financial advisor on a regular basis to review your investment program. Your advisor can assist you in determining if your current investment program is appropriate for your financial goals. /s/ George A. Henning George A. Henning Chairman of the Board and President (1) Lipper ranked Pacific Advisors Small Cap Fund (A) as the number #1 small cap core fund out of 533 funds based on its one-year return of 78.19% as of June 30, 2004. The Fund ranked 84 out of 303 funds based on its five-year return; and 70 out of 87 funds based on its ten-year return. The Fund's benchmark, the Russell 2000, had a one-year return of 33.37% as of June 30, 2004. Small cap companies typically have fewer financial resources and may carry higher investment risks and experience greater stock price volatility than larger cap stocks. Morningstar ranked Pacific Advisors Growth Fund (A) in the top 11% of large cap growth funds based on its one-year return of 22.04% as of June 30, 2004. The Fund ranked 140 out of 1,331 fund based on its one-year return; and 595 out of 960 funds based on its five-year return. The Fund's benchmarks, the S&P 500 and the Russell 1000, had one-year returns of 19.11% and 19.48%, respectively, as of June 30, 2004. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Current performance may be lower or higher than performance data quoted. Fund returns do not take into account the maximum 5.75% sales charge on Class A shares. Returns would be lower if the sales charge was included. Performance figures represent the change in value over the stated period assuming reinvestment of dividends and capital gains at net asset value and after expense reimbursements. Returns do not consider individual taxes which may reduce actual returns when shares are sold. For information on current performance, call (800) 989-6693. 2 PACIFIC ADVISORS GOVERNMENT SECURITIES FUND INVESTS PRIMARILY IN FIXED-INCOME SECURITIES GUARANTEED BY THE U.S. GOVERNMENT OR ITS INSTRUMENTALITIES. THE FUND MAY ALSO INVEST IN OTHER INCOME PRODUCING INSTRUMENTS, INCLUDING DIVIDEND-PAYING COMMON STOCKS, FOR INCOME AND CAPITAL APPRECIATION. INTERVIEW WITH PORTFOLIO MANAGER THOMAS H. HANSON FOR THE SIX MONTHS ENDED JUNE 30, 2004, THE FUND HAD A TOTAL RETURN OF - 1.16% FOR CLASS A SHARES, AND - 1.55% FOR CLASS C SHARES(1). THE FUND'S BENCHMARK, THE LEHMAN INTERMEDIATE TREASURY BOND INDEX(2), RETURNED - 0.15% DURING THE SAME PERIOD. Q HOW DID THE INTEREST RATE ENVIRONMENT CHANGE IN THE FIRST HALF OF THE YEAR? A In early 2004, the Federal Reserve gave clear signals that it intended to begin raising short-term interest rates. With the economy growing at a stable and healthy rate, the Fed believed it necessary to raise rates in order control inflation. At the same time, the Fed assured the market it would raise rates at a "measured" pace to avoid disrupting economic growth. The Fed raised rates by 0.25% in June and followed with another 0.25% increase later in the summer. Rising rates, coupled with uncertainty surrounding the timing and scope of the Fed's actions, made for a volatile bond market in the first half of the year. To understand the bond market in the first half of the year, it important to understand the nature of interest rate movements. On a large scale, interest rates move in cycles from peak to trough and back to another peak. The severity of the increase or decrease in a cycle depends primarily on the state of the economy and activity by the Fed. While the length of each cycle varies, it generally takes 3 to 4 years for interest rates to come full circle. For example, short-term rates last peaked in September 2000 at approximately 6 1/2%. It was mid-2004 before rates bottomed at 1% and began to rise. It will likely take at least 12 to 18 months before short-term rates reach another peak. Rate increases and decreases rarely occur in a steady fashion. In the midst of the larger cycle, rates tend to move in short-term waves over a period of weeks or months. For example, in a rising rate environment, rates typically advance, then pullback and advance again. With each advance, rates reach a new high until they reach a peak. These waves occur as a result of the market reacting to economic data and related news. As we saw in the first half of 2004, while rates trended higher, the rise was punctuated by several shorter-term pullbacks. Q WHAT WAS THE FUND'S INVESTMENT STRATEGY IN RESPONSE TO THESE DEVELOPMENTS? A The Fund aims to optimize total return by adapting to interest rate movements. Unlike many "laddered" bond fund portfolios that seek yield and do little to manage risk, our total return approach actively manages risk while seeking to achieve performance from income and capital appreciation opportunities. As interest rates rise, bond prices decline. Given the long-term trend of rising rates, the Fund remained focused on minimizing volatility and protecting principal by holding short-term government securities. We managed risk and took advantage of opportunities to capture higher yields and capital appreciation by adapting to shorter-term interest rate movements. At the end of 2003, rates reached a short-term peak and began to pullback. To capitalize on higher yields and capital appreciation potential at that time, we invested a portion of the portfolio in intermediate-term securities extending the portfolio's average maturity to approximately 4 years. Subsequently, in 2004, rates reached the lower end of their trading range and began to rise. In response, we realized some capital appreciation by - ---------- (1) PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Current performance may be lower or higher than performance data quoted. Fund returns do not take into account the maximum 4.75% sales charge on Class A shares. Returns would be lower if the sales charge was included. Performance figures represent the change in value over the stated period assuming reinvestment of dividends and capital gains at net asset value and after expense reimbursements. Returns do not consider individual taxes which may reduce actual returns when shares are sold. For information on current performance, call (800) 989-6693. (2) The Lehman Treasury Bond Index is an unmanaged index of intermediate term government bonds since 12/31/80. 3 selling these intermediate-term bonds and shortening the average maturity to approximately 2 1/2 years. We also continued to maintain a portion of the portfolio in equities for added income and capital appreciation potential. We concentrated the Fund's equity holdings in preferred stocks which offered higher yields than common stocks. These positions allowed the Fund to benefit from strength in the equity market which helped compensate for weaker performance in the bond market. Q THE MAJORITY OF U.S. TREASURIES ARE FOREIGN-OWNED. DOES THIS CREATE A RISK FOR THE GOVERNMENT BOND MARKET? A U.S. government securities consistently remain in high demand because of their relative safety and stability. Foreign governments and institutions own approximately 60% of all outstanding U.S. Treasury securities with the majority owned by Asian investors. While a major sell-off by these investors could create a problem for the bond market, it is unlikely to happen for several reasons. U.S. treasuries are considered some of the safest investments in the world. It would take a catastrophic change in the state of the country to reduce the appeal of U.S. government securities. Perhaps more importantly, these foreign investors have a substantial vested interest in helping maintain stability in the U.S. bond market. A significant sell-off would upset trade balances with the U.S. and negatively impact their own economies. Q WHAT IS YOUR OUTLOOK FOR THE REMAINDER OF THE YEAR? A Economic data remains relatively positive and we expect the economy will continue to expand at a healthy rate in the last half of the year. As the economy continues to grow, we expect to see a steady rise in interest rates. Even after two rate increases, the fed funds rate remains low at 1.50%. We expect the Fed will look to raise that rate to a more historical norm of 3% over the next 18 months. We also expect a continued rise in long-term rates, although movement should be less dramatic on that end of the yield curve. At present, we anticipate long-term rates will peak between 5 1/2% and 6% during the next 18 months. This rise will likely occur in a stair-step fashion producing narrow trading channels. We expect rates will rise and then pullback before moving higher as the market responds to economic data and rate increases by the Fed. Given the general trend for rising rates, we will remain focused on protecting principal by holding shorter-term government securities during this period of higher risk. At the same time, we will seek to adapt to shorter-term interest rate movements. When we experience a temporary pullback in rates, the Fund will move into longer-term treasuries to capture higher yields and the potential for capital appreciation. [CHART] INVESTMENT MIX as of 06/30/04 1. U.S. TREASURY BILLS 52.78% 2. U.S. GOVERNMENT AGENCIES 29.37% 3. PREFERRED STOCK 15.55% 4. EQUITIES 2.02% 5. CASH 0.28%
4 PACIFIC ADVISORS INCOME AND EQUITY FUND INVESTS PRIMARILY IN INVESTMENT-GRADE FIXED-INCOME SECURITIES. THE FUND MAY ALSO INVEST IN STOCKS FOR LONG-TERM CAPITAL APPRECIATION. INTERVIEW WITH PORTFOLIO MANAGERS THOMAS H. HANSON STEPHEN K. BACHE, CFA FOR THE PERIOD ENDED JUNE 30, 2004, THE FUND HAD A TOTAL RETURN OF 0.33% FOR CLASS A SHARES, AND 0.08% FOR CLASS C SHARES(1). THE FUND'S BENCHMARKS, THE LEHMAN INTERMEDIATE CORPORATE BOND INDEX(2) AND THE S&P 500 INDEX(3), RETURNED - 0.04% AND 3.44%, RESPECTIVELY, DURING THE SAME PERIOD. Q HOW DID CORPORATE BONDS PERFORM IN THE FIRST HALF OF THE YEAR? A The corporate bond market remained challenging in 2004 as a result of continued interest rate uncertainty. In early 2004, speculation focused on WHEN the Federal Reserve would begin raising short-term interest rates. After the Fed began raising rates in June, speculation surrounded the uncertain PACE and EXTENT of future rate increases. Rising rates and persistent uncertainty made for a volatile bond market. Despite the recent rise in rates, attractive yields on quality bonds remained limited. Over the last year, many companies refinanced their debt to take advantage of low interest rates removing some higher yielding bonds from the market. In addition, many companies also built up significant cash reserves which reduced their need to issue new bonds to finance expansion. In this environment, the Fund's primary goal has been to protect principal. We continued to concentrate in shorter duration bonds to minimize price depreciation and interest rate risk. When possible, we took profits in some positions and acquired new bonds in companies such as LIBERTY MEDIA, ANHEUSER-BUSCH and JOHNSON AND JOHNSON. We also looked for opportunities to capture higher yields. These opportunities included investments in government agencies, floating rate notes and companies with improving credit situations. Q WHAT ROLE DID THE FUND'S EQUITY INVESTMENTS PLAY DURING THE FIRST SIX MONTHS? A The equity market also proved fairly challenging in the first half of the year. In spite of good economic news and earnings growth, the market remained event driven and increasingly unpredictable in response to geopolitical concerns, rising energy prices and anticipated higher interest rates. While overall equity market performance was uninspiring, there was opportunity to achieve growth and income in individual stocks. To capitalize on these performance opportunities, the Fund maintained a higher percentage of its holdings in high-quality, dividend paying common and preferred stocks. To manage risk and provide stability, we continued to focus on larger-cap companies with more stable and predictable income and growth. We made relatively few changes to the equity portfolio over this period. We maintained a diverse mix of stocks with an emphasis on the leading sectors in the market including energy, basic materials and financial services. The equity component of the portfolio was instrumental in the first half of the year to help compensate for lagging performance in the bond market. Q HOW WILL HIGHER INTEREST RATES IMPACT THE CORPORATE BOND MARKET? A With two increases, the Fed has raised short-term rates by 0.50% bringing the fed funds rate to 1.50%. We may see one or two more quarter-point increases this year but we believe the Fed will likely wait to take further action until after the Presidential election. We anticipate the - ---------- (1) PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Current performance may be higher or lower than performance data quoted. Fund returns do not take into account the maximum 4.75% sales charge on Class A shares. Returns would be lower if the sales charge was included. Performance figures represent the change in value over the stated period assuming reinvestment of dividends and capital gains at net asset value and after expense reimbursements. Returns do not consider individual taxes which may reduce actual returns when shares are sold. For information on current performance, call (800) 989-6693. (2) The Lehman Intermediate Corporate Bond Index is an unmanaged index of intermediate term U.S. corporate bonds since 01/01/73. (3) The Standard & Poor's 500 Index is an unmanaged, market capitalization weighted measure of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and The Nasdaq Stock Market. The Index returns assume reinvestment of dividends, but, unlike the Fund's returns, do not reflect the effects of management fees or expenses. 5 Fed will work to bring rates back to a historical norm of 3% to 4% over the next 12 to 18 months. As the Fed has repeatedly stated, however, it will take a "measured" approach to raising rates in order to avoid stunting economic growth. Rising rates will continue to exert downward pressure on the bond market. We expect rates will rise in fits and starts as the market responds to economic news and further activity by the Fed. In a rising rate environment, the major challenges will be managing volatility and minimizing price depreciation. Q HOW WILL THE FUND IMPLEMENT ITS INVESTMENT STRATEGY DURING THE REMAINDER OF THE YEAR? A We expect the equity market will remain challenging in the latter half of the year. While the economy is on track for continued growth, concerns about terrorism, inflation and the growing trade and Federal budget deficits will likely prevent a positive breakthrough in market performance. Even so, the equity market will continue to provide the best opportunities for income and growth. As in the first half of the year, careful stock selection will be the key to managing risk and capitalizing on performance opportunities. In light of ongoing volatility, the Fund will maintain a more conservative bond strategy. We will continue to focus on high-quality, shorter-term bonds and take advantage of higher-yielding opportunities whenever possible. This strategy will not only help manage risk but will position the Fund to lock in higher yields on longer-term bonds when rates eventually peak. At the same time, we anticipate maintaining the Fund's higher equity exposure to benefit from stronger performance in that area of the market. [CHART] INVESTMENT MIX as of 06/30/04 1. CORPORATE BONDS 61.85% 2. EQUITIES 18.24% 3. PREFERRED STOCK 10.93% 4. U.S. GOVERNMENT SECURITIES 4.73% 5. CASH 4.25%
6 PACIFIC ADVISORS BALANCED FUND INVESTS PRIMARILY IN LARGE AND MEDIUM CAP COMMON STOCKS WITH AT LEAST 25% OF THE ASSETS INVESTED IN FIXED-INCOME SECURITIES. INTERVIEW WITH PORTFOLIO MANAGER STEPHEN K. BACHE, CFA FOR THE SIX MONTHS ENDED JUNE 30, 2004, THE FUND RETURNED - 0.69% FOR CLASS A SHARES, AND - 1.10% FOR CLASS C SHARES(1). DURING THE SAME PERIOD, THE FUND'S BENCHMARKS, THE S&P 500 INDEX(2) AND THE LEHMAN INTERMEDIATE CORPORATE BOND INDEX(3), RETURNED 3.44% AND - 0.04%, RESPECTIVELY. Q HOW DID YOU MANAGE THE MIX BETWEEN CORPORATE BONDS AND EQUITIES IN THE FIRST HALF OF THE YEAR? A Continued interest rate uncertainty kept the corporate bond market volatile in the first six months. Even after the Federal Reserve began raising short-term interest rates in the second quarter, the market remained uneasy about the potential pace and extent of the Fed's increases. While the equity market achieved stronger performance in the first half of the year, it remained volatile and unpredictable. Positive momentum from solid economic data and strong earnings growth were largely offset by concerns about terrorism, inflation and rising interest rates. During the first half of the year, the Fund maintained greater equity exposure to capitalize on the strength in the equity market and reduce its risk exposure in the bond market. We continued to concentrate equity holdings in larger, more stable companies with reliable earnings and growth. Market conditions gave us opportunities to add to existing positions in such companies as MICROSOFT, PFIZER, CABOT MICROELECTRONICS, and COOPER CAMERON. We also focused on acquiring new positions and adding to existing holdings in sectors receiving the greatest benefit from the economic recovery. This included BRITISH PETROLEUM, ALLETE and SUNCOR in the energy field; communications companies AUTOMATIC DATA PROCESSING AND NOKIA; and raw materials suppliers such as RIO TINTO. To manage higher volatility and interest rate risk, we reduced the Fund's bond holdings to approximately 40%. We continued to concentrate holdings in high-quality, shorter duration bonds with less sensitivity to interest rate fluctuations. New bond positions were also centered in economically advantageous sectors such as energy with FLORIDA POWER & LIGHT 6.00% 06/01/08, insurance through OLD REPUBLIC 7.00% 06/15/07, and REYNOLDS METALS 9.20% 04/24/06 in the raw materials sector. Q WHY IS RISK MANAGEMENT SUCH AN IMPORTANT PART OF THE FUND'S INVESTMENT STRATEGY? A Balanced funds come in all shapes and sizes. While all balanced funds contain a blend of equities and fixed income securities, their investment strategies vary greatly. Our Fund is designed to serve as a core holding or as an anchor in an investment portfolio. The Fund specifically seeks to provide investors with a relatively stable portfolio that provides diversification and solid performance. In order to achieve these goals, we take a more conservative approach than many other balanced funds. We begin by avoiding aggressive trading strategies or speculative investments. On the equity side, we look for solid, typically larger cap, companies with reliable growth and earnings. In our fixed income securities, we stick to investment grade bonds and actively manage our maturity exposure to minimize interest rate risk. We also control risk by actively managing the blend between equities and bonds to capitalize on the strongest performing area of the market and minimize exposure to weaker or more volatile areas of the market. In 2004, this approach meant increasing the Fund's equity position to capitalize on strength in the equity market while reducing the - ---------- (1) PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Current performance may be lower or higher than performance data quoted. Fund returns do not take into account the maximum 5.75% sales charge on Class A shares. Returns would be lower if the sales charge was included. Performance figures represent the change in value over the stated period assuming reinvestment of dividends and capital gains at net asset value and after expense reimbursements. Returns do not consider individual taxes which may reduce actual returns when shares are sold. For information on current performance, call (800) 989-6693. (2) The Standard & Poor's 500 Index is an unmanaged, market capitalization weighted measure of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and The Nasdaq Stock Market. The Index returns assume reinvestment of dividends, but, unlike the Fund's returns, do not reflect the effects of management fees or expenses. (3) The Lehman Corporate Bond Index is an unmanaged index of intermediate term U.S. corporate bonds since 01/01/73. 7 Fund's bond exposure to minimize the risk and volatility associated with rising interest rates. As a result of its more conservative investment strategy, the Fund may perform differently than its peers. For example, the Fund often lags its peers in performance in up-trending markets. While we seek to participate in market growth, we avoid being overly aggressing and assuming unnecessary risk. Conversely, the Fund's focus on risk management may help it outperform its peers in declining markets. Q HOW WILL RISING INTEREST RATES IMPACT THE CORPORATE BOND AND EQUITY MARKETS? A In early 2004, the Fed indicated that it intended to begin raising short-term interest rates to control inflation. Beginning in late June, the Fed made two quarter-point increases to bring the fed funds rate up to 1.50%. We may still see one more quarter-point increase before year-end, but the Fed will likely avoid further action until after the Presidential election. Based on current economic data, we anticipate the Fed will look to raise rates to approximately 2 1/2% over the next 18 months. The Fed has indicated that it will move cautiously and raise rates at a "measured" pace to avoid short circuiting U.S. economic growth. The pace of the increases will depend on a number of factors including economic growth, the strength of the dollar and the extent of the trade and Federal budget deficits. Rising rates will put moderate downward pressure on the equity market. The equity market is most concerned with the impact of rising rates on consumer spending and corporate profitability. While this uncertainty will bring some volatility to the market, we expect the benefits of a strong economy will largely offset the negative effects of higher interest rates. Higher rates will put stronger downward pressure on the corporate bond market. We expect the bond market to remain relatively volatile until the full impact and extent of the Fed's actions become more certain. Even with a rise in rates, we expect attractive yields on high-quality bonds will continue to be harder to find. Many corporations have refinanced their debt to take advantage of historically low interest rates. In addition, many firms have accumulated large cash reserves making them less inclined to borrow money to finance expansion. Q WHAT OTHER FACTORS WILL IMPACT MARKET PERFORMANCE IN THE REMAINDER OF THE YEAR? A The economy and corporate profitability will remain major factors in market performance. At present, the outlook is good on both fronts. The economy continues to grow at a healthy pace and will likely achieve a growth rate of about 3 1/2% for the year. Earnings should also continue to grow at a healthy rate as most corporations have positioned themselves well by managing debt levels, improving productivity and accumulating cash reserves. The market, however, will remain concerned with a number of issues that could hurt long-term economic growth and corporate earnings. The impact of higher interest rates and rising energy costs on consumer spending is at the top of the list. If consumer spending slows, there is concern that capital spending by businesses will not accelerate enough to sustain economic growth. There are also growing concerns over the potential strain on the economy from the expanding trade and Federal budget deficits. Finally, geopolitical instability and the threat of terrorist attacks remain a constant concern. Q HOW WILL THE FUND MANAGE THESE MARKET CONDITIONS? A Even with good economic and earnings growth, we expect we will continue to see elevated volatility in the equity market as a result of these uncertainties. Nonetheless, we believe the equity market represents the best opportunity for growth in the second half of the year. While overall market performance may remain lackluster, numerous opportunities for strong performance should exist in individual stocks. The Fund will maintain a greater weighting in equities to capitalize on these opportunities. At the same time, we will continue to employ careful stock selection to manage ongoing risk. 8 As we mentioned earlier, interest rate uncertainty will continue to produce a more volatile corporate bond market. In addition, in a rising interest rate environment, bond price depreciation will become a growing concern. To minimize price depreciation and interest rate risk, the Fund will continue to focus on shorter duration investment grade bonds. When rates eventually reach a peak, the Fund will be well positioned to take advantage of opportunities to lock in longer-term bonds with higher yields and the potential for capital appreciation. [CHART] INVESTMENT MIX as of 06/30/04 1. EQUITIES 55.87% 2. CORPORATE BONDS 41.18% 3. CASH 2.32% 4. U.S. GOVERNMENT SECURITIES 0.63%
9 PACIFIC ADVISORS GROWTH FUND INVESTS PRIMARILY IN COMPANIES THAT ARE A PART OF THE S&P 500 COMPOSITE INDEX(1) OR THE NASDAQ 100 INDEX(2). INTERVIEW WITH PORTFOLIO MANAGER THOMAS H. HANSON FOR THE SIX MONTHS ENDED JUNE 30, 2004, THE FUND RETURNED 5.46% FOR CLASS A SHARES, AND 4.98% FOR CLASS C SHARES(3). THE FUND'S BENCHMARKS, THE S&P 500 AND THE RUSSELL 1000(4), ROSE 3.44% AND 3.33%, RESPECTIVELY, DURING THE SAME PERIOD. Q HOW DID THE FUND ACHIEVE ITS PERFORMANCE IN THE FIRST HALF OF THE YEAR? A A consistent investment strategy and diligent risk management yielded positive results for the Fund in the first six months. In 2004, we continued to concentrate the portfolio in larger cap stocks in sectors and industries benefiting from the economic recovery. This included companies supplying basic materials such as GEORGIA PACIFIC, LOUISIANA PACIFIC, and PHELPS DODGE; energy companies such as APACHE and EXXON MOBIL; industrial holdings such as ITT INDUSTRIES; and select technology positions. We balanced these investments with core holdings in companies less sensitive to market and economic changes. These core holdings offer more stable, predictable earnings growth which helps manage risk and volatility while enhancing performance opportunities. Core holdings were primarily concentrated in healthcare equipment and supplies through companies such as JOHNSON & JOHNSON, ZIMMER HOLDINGS, and ST. JUDE MEDICAL. Portfolio activity was relatively modest in the first half of the year. Sector rotation within the market was limited resulting in few changes to the Fund's portfolio. The Fund strategically built a strong portfolio in late 2003 and early 2004 and benefited from these positions as the economic recovery progressed. Q WHY DID THE FUND CHANGE ITS BENCHMARK FROM THE NASDAQ 100 TO THE RUSSELL 1000? A Benchmark indices are intended to provide a basis for comparison to help assess a fund's performance. To be an accurate gauge, the benchmark index should reflect the composition of a fund's portfolio as closely as possible. With only 100 stocks, the Nasdaq 100 is a relatively small representation of large cap stocks. In addition, due to the Index's small size and calculation methodology, its performance is largely driven by the top 12 stocks which are concentrated in the technology sector. As a result, the Nasdaq 100 only represents the performance of a narrow segment of the large cap market. In contrast, the Russell 1000 contains a broader representation of large cap stocks and provides a more accurate measure of overall large cap performance. Based on the Fund's investment strategy, the most accurate performance comparison would be a blend of its two benchmarks, the S&P 500 and the Russell 1000 Indices. Q HOW DOES THE FUND IDENTIFY AND SELECT INVESTMENTS? A The Fund focuses on investing in stocks that offer "growth-at-a-reasonable-price." To meet the Fund's "growth" criteria, a company must demonstrate accelerating revenue growth, above average earnings, and positive share price momentum. In order to be considered for investment in the Fund, these companies must be reasonably priced based on their current and future earnings projections, the economic environment and valuations within their peer group and the overall market. - ---------- (1) The Standard & Poor's 500 Index is an unmanaged, market capitalization weighted measure of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and The Nasdaq Stock Market. The Index returns assume reinvestment of dividends but, unlike the Fund's returns, do not reflect the effects of management fees or expenses. (2) The Nasdaq 100 Stock Index is an unmanaged, weighted measure of the 100 largest non-financial domestic and international common stocks listed on The Nasdaq Stock Market. The Index returns assume reinvestment of dividends, but, unlike the Fund, do not reflect management fees or expenses. (3) PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Current performance may be lower or higher than performance data quoted. Fund returns do not take into account the maximum 5.75% sales charge on Class A shares. Returns would be lower if the sales charge was included. Performance figures represent the change in value over the stated period assuming reinvestment of dividends and capital gains at net asset value and after expense reimbursements. Returns do not consider individual taxes which may reduce actual returns when shares are sold. For information on current performance, call (800) 989-6693. (4) The Russell 1000 Stock Index is an unmanaged, market capitalization weighted measure of stock market performance. It contains the stocks of the 1,000 largest publicly traded companies within the Russell 3000 Index. The Index does not take capital gains into consideration. Index returns assume the reinvestment of dividends, but, unlike the Fund's returns, do not reflect the effects of management fees or expenses. 10 We identify these stocks using a top-down approach that combines technical and fundamental analysis. We begin by assessing macroeconomic conditions to identify the sectors and industries that will thrive in the current economic and market environment. Next, we take a more in-depth look at the favorable sectors and industries to determine which are likely to be market leaders. Then we identify and invest in the strongest performing stocks within those sectors and industries. This process involves a significant amount of technical research looking at factors such as earnings projections, PE ratios, moving averages and volatility measures. We also use fundamental research and look at a company's financials, management and overall business strategy to complete our stock selection process. The Growth Fund's investment strategy complements the Multi-Cap Value Fund which takes an opposite approach that strictly uses fundamental research to identify undervalued companies. As a result, these two Funds can work well together in an investor's portfolio to provide diversified exposure to different investment strategies and areas of the market. Q WHAT IS YOUR OUTLOOK FOR THE MARKET IN THE COMING MONTHS? A The good news for the market lies in the economy and corporate earnings. Economic fundamentals remain strong in the U.S., Asia and Europe. Current data suggest domestic and global economic growth will continue at a reasonably healthy pace throughout the year. Corporate earnings made a dramatic recovery in 2003 by growing over 20% as a result of sound fiscal management, productivity increases and strong consumer spending. While the pace has slowed, corporate earnings growth should also remain strong through year-end. In the second half of the year, however, we expect the market will be focused on growing concerns in a number of areas. Of primary concern will be continued geopolitical instability in the Middle East, the growing threat of additional terrorist attacks and uncertainty over the outcome of the Presidential election. In addition, the market is also growing increasingly concerned with modest jobs growth, rising energy costs, higher interest rates and their potential impact on U.S. economic growth. These uncertainties will likely keep the market in a trading range at least through year-end. Such conditions will likely produce the same type of reactionary and event-driven market that we saw in the first half of the year. Despite these conditions in the overall market, we expect strong performance from select sectors and individual stocks which should yield positive returns in the major market indices by year-end. Q HOW WILL GROWTH STOCKS PERFORM IN THIS MARKET? A While market conditions may remain difficult in the near-term, they should create a number of opportunities for the Fund. As corporate earnings slow to a more historical and sustainable growth rate, we expect to find new opportunities to acquire attractive growth stocks at reasonable prices. Moreover, as the economy moves from recovery to expansion, we expect to see section rotation with market leadership moving away from defensive sectors such as consumer staples to more aggressive sectors like technology. We expect there will be some rotation in the Fund's portfolio as we seek to keep the portfolio concentrated in the leading sectors and industries of the market. At the same time, we will also continue to keep a portion of the Fund's portfolio in more defensive positions. These core holdings should provide added stability for the Fund and help manage risk in a volatile market environment. As it was in the first half of the year, prudent stock selection will remain the key to managing risk while achieving performance. We believe the Fund's disciplined investment approach is well suited to manage the challenges and capitalize on opportunities in the market for the long-term growth investor. [CHART] INVESTMENT MIX as of 06/30/04 1. EQUITIES 85.52% 2. CASH 14.48%
11 PACIFIC ADVISORS MULTI-CAP VALUE FUND INVESTS IN A DIVERSIFIED PORTFOLIO OF LARGE TO SMALL CAPITALIZATION COMPANIES USING AN ACTIVELY MANAGED, VALUE-BASED INVESTMENT APPROACH. INTERVIEW WITH PORTFOLIO MANAGER SHELLY J. MEYERS FOR THE SIX MONTHS ENDED JUNE 30, 2004, CLASS A SHARES RETURNED - 0.44% AND CLASS C SHARES RETURNED - 0.79%(1). DURING THE SAME PERIOD, THE FUND'S BENCHMARK, THE S&P 500(2), RETURNED 3.44%. Q HOW DID YOU IMPLEMENT THE FUND'S INVESTMENT STRATEGY IN THE FIRST HALF OF THE YEAR? A The first half of the year brought a somewhat volatile and unpredictable market. In these conditions, investors are often tempted to adjust their investment strategy as they chase returns in better performing investments. Maintaining a disciplined investment strategy, however, offers the best opportunity for long-term growth. During the first half of the year, the Fund continued to concentrate on maintaining a well rounded portfolio of solid, undervalued companies. We focused primarily on two types of companies. First, we looked for companies that would benefit from a strengthening economy. This included ARROW ELECTRONICS, the largest distributor of electronic parts to businesses; PHELPS DODGE, a large supplier of raw materials; and high-quality technology companies with strong long-term growth prospects such as MICROSOFT and INTEL. These companies performed well in the first six months as they benefited from an improving economy and an increase in capital spending by businesses. Given the market's volatility, we complemented these holdings with positions in more defensive companies. We looked for companies that would be more resistant to economic changes such as oil and gas producer WILLIAMS COMPANIES, telecom provider BELLSOUTH, and specialty healthcare companies CLOSURE MEDICAL and ENDO PHARMACEUTICALS. These positions helped the Fund manage risk while providing additional opportunities for growth. Q WHAT FACTORS HAD THE GREATEST IMPACT ON PERFORMANCE? A The unpredictable nature of the market presented the greatest challenge in the first half of the year. Despite good economic and earnings growth, the market remained reactionary and event-driven as a result of geopolitical and other uncertainties. In this climate, the market often overreacted to real and perceived disappointing news from individual companies. Maintaining discipline and patience was critical to helping the Fund achieve long-term results. The Fund's diversified investment strategy helped manage increased market risk and achieve strong performances from a number of holdings in a variety of industries including ACTIVISION, ENDO PHARMACEUTICALS, and LUCENT TECHNOLOGIES. Market volatility affected some stocks more than others. Some of the Fund's positions suffered temporary setbacks causing short-term Fund performance to lag the market. After examining the company's news and re-evaluating the value of the company, we determined that the majority of these positions remained valuable long-term holdings for the Fund. For example, in April the Chairman of METROLOGIC INSTRUMENTS sold a sizeable portion of his holdings in the company. The market assumed this activity indicated trouble within the company causing a decline in the company's stock price. Upon closer examination, however, it was clear that this was a routine transaction unrelated to the company's operations. The Fund used this decline as an opportunity to increase its position in a company with valuable long-term prospects. - ---------- (1) PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Current performance may be lower or higher than performance data quoted. Fund returns do not take into account the maximum 5.75% sales charge on Class A shares. Returns would be lower if the sales charge was included. Performance figures represent the change in value over the stated period assuming reinvestment of dividends and capital gains at net asset value and after expense reimbursements. Returns do not consider individual taxes which may reduce actual returns when shares are sold. For information on current performance, call (800) 989-6693. (2) The Standard & Poor's 500 Index is an unmanaged, market capitalization weighted measure of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and The Nasdaq Stock Market. The Index returns assume reinvestment of dividends, but, unlike the Fund's returns, do not reflect the effects of management fees or expenses. 12 Q HOW DO YOU SELECT INVESTMENTS FOR THE FUND? A We identify equity opportunities and select investments for the Fund using a fundamental, bottoms-up approach. Using proprietary research and analytical systems, we look for solid, undervalued companies that meet three primary investment criteria. We look for STRONG FUNDAMENTALS by analyzing a company's financial statements, business plan and management. Second, we look at a company's VALUE to determine if it is selling at a discount based on the underlying value of the business and its assets. Finally, we look for a PRICE CATALYST, an internal or external factor that will ignite and sustain a positive movement in the company's stock price. We continuously monitor each of the Fund's holdings to watch for changes in any of these areas that might prompt us to reduce or sell the Fund's position. Under normal market conditions, we seek to maintain a fully invested portfolio diversified across all market capitalizations and a variety of sectors. The Fund typically holds between 35 and 50 positions. At this size, the Fund remains diversified while allowing us to have a thorough understanding of each investment. Q WHAT CHALLENGES DOES THE MARKET FACE IN THE COMING MONTHS? A The greatest challenge to the market is ongoing geopolitical uncertainty. The market remains acutely concerned about instability in the Middle East as well as the potential for additional terrorist attacks in the U.S. and abroad. In particular, the market is concerned that terrorists may attack the U.S. in the coming months in an effort to influence the outcome of the Presidential election. While the threat of further attacks will remain even after the election, market concerns should subside if the election passes without event. The rising cost of oil will also continue to weigh on the market. The tension between supply and demand is shaping up to be a long-term problem. Demand, particularly in the U.S. and China, is expected to continue to increase significantly over the next several years. While supply remains adequate, instability in many of the major oil producing countries raises concerns about future shortages. Economic growth will also remain a top concern. Current economic data remain solid and forecasts suggest the economy will continue to grow at a healthy pace throughout 2004. Nonetheless, the market remains concerned that rising interest rates, higher oil prices and uncertain job growth will slow consumer spending and stunt economic growth. Q HOW WILL THE FUND MANAGE THESE CHALLENGES? A In light of these uncertainties and concerns, we expect the market will remain in a holding pattern during the coming months. The market will likely remain reactionary and volatile as it attempts to assess the magnitude of these risks. In the absence of a major positive catalyst, we do not anticipate a major upward breakthrough in market performance before the end of the year. These conditions will continue to require patience and discipline. We will continue our careful stock selection and remain focused on managing risk through a well diversified portfolio of sound, undervalued companies. The current portfolio consists of companies that provide the Fund with the opportunity for long-term growth. In addition, we believe this market environment will provide the Fund with opportunities to acquire new positions at attractive discounts. [CHART] INVESTMENT MIX as of 06/30/04 1. EQUITIES 97.71% 2. CASH 2.29%
13 PACIFIC ADVISORS SMALL CAP FUND INVESTS PRIMARILY IN SMALL COMPANY STOCKS(1) WITH A MARKET CAP BELOW $500M USING A VALUE INVESTMENT APPROACH. THE FUND FOCUSES ON COMPANIES WITH STRONG EARNINGS AND GROWTH POTENTIAL. INTERVIEW WITH PORTFOLIO MANAGER GEORGE A. HENNING FOR THE SIX MONTHS ENDED JUNE 30, 2004, THE FUND RETURNED 18.75% FOR CLASS A SHARES, AND 18.38% FOR CLASS C SHARES(2). THE FUND'S BENCHMARK, THE RUSSELL 2000 STOCK INDEX(3), RETURNED 6.76% FOR THE SAME PERIOD. LIPPER RANKED PACIFIC ADVISORS SMALL CAP FUND (A) AS THE NUMBER #1 SMALL CAP CORE FUND OUT OF 533 FUNDS BASED ON ITS ONE-YEAR RETURN OF 78.19% AS OF JUNE 30, 2004(2). THE FUND RANKED 84 OUT OF 303 FUNDS BASED ON ITS FIVE-YEAR RETURN; AND 70 OUT OF 87 FUNDS BASED ON ITS TEN-YEAR RETURN. Q THE FUND LED ITS CATEGORY IN PERFORMANCE OVER THE LAST YEAR. WHAT ARE THE KEYS TO THE FUND'S SUCCESS? A The Fund's superior performance is the result of disciplined stock selection and risk management. When we select investments, we begin by looking for solid companies with strong potential for improved performance over the next several years. These companies are typically leaders in their industry or shadow stocks to larger companies within their industry. For example, one of the Fund's long-term holdings, INTERVOICE, is a leader in voice recognition technology. In 2003, Intervoice entered into a partnership with Microsoft to provide voice recognition technology for its software products. This added business opportunity should further enhance Intervoice's growth prospects. The Fund also benefited from shadow stocks such as DENBURY RESOURCES and HARVEST NATURAL RESOURCES. In 2004, these companies profited from rising energy prices and mirrored the success of larger oil and gas companies. We also look for industry sectors and companies that will benefit from the prevailing economic environment. In 2003 and 2004, this meant increasing our exposure to transportation, energy, manufacturing and consumer goods and services companies that would benefit from an economic rebound. As a part of this focus, the Fund acquired SCS TRANSPORTATION and US XPRESS ENTERPRISES in transportation, energy companies MITCHAM INDUSTRIES and MISSION RESOURCES, TITAN INTERNATIONAL and COMMERCIAL METALS in manufacturing, and consumer goods and services provider DAVE & BUSTERS. As the economy strengthened, these holdings boosted the Fund's performance. Risk management plays a key role in our stock selection process and the Fund's success. While looking for companies with economic advantages, we seek to minimize risk by avoiding areas of speculative growth. When it's in the Fund's interest to be in more volatile sectors, we invest in more stable, mainstream companies. For example, in the current rebounding economy, we believed the technology sector would yield valuable growth opportunities. We wanted the Fund to benefit from growth in the technology sector without taking on the high volatility and risk associated with many technology companies. The Fund held positions in BELL MICROPRODUCTS, which provides data storage, semi conductor and computer products, and CAMTEK LIMITED, which produces optical inspection systems for circuit boards. The demand for their products and services should continue to increase with growth in the technology industry. We also manage risk by investing a portion of our diversified portfolio in more defensive companies. In 2004, we increased the number of portfolio holdings by approximately 25% to help - ---------- (1) Small cap companies typically have fewer financial resources and may carry higher investment risks and experience greater stock price volatility than larger cap stocks. (2) PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Current performance may be lower or higher than performance data quoted. Fund returns do not take into account the maximum 5.75% sales charge on Class A shares. Returns would be lower if the sales charge was included. Performance figures represent the change in value over the stated period assuming reinvestment of dividends and capital gains at net asset value and after expense reimbursements. Returns do not consider individual taxes which may reduce actual returns when shares are sold. For information on current performance, call (800) 989-6693. (3) The Russell 2000 Stock Index is an unmanaged, market-weighted measure of stock market performance. It contains stocks of the 2,000 smallest publicly traded companies of the Russell 3000 Index. The Russell 2000 Stock Index does not take capital gains into consideration, and, unlike the Fund, does not reflect the effects of management fees or expenses. 14 minimize the Fund's downside risk. In addition, throughout 2003 and 2004, we kept a portion of the portfolio relatively defensive by investing in companies more resistant to economic changes. These investments represent core holdings for the Fund and provide the opportunity for good growth in any type of economy. These core holdings include healthcare, financial services, manufacturing and energy companies such as AMERICA SERVICE GROUP, FIRST CASH FINANCIAL SERVICES, EASTWEST BANK, KEYSTONE AUTOMOTIVE, and REMINGTON OIL. All of these elements combined helped the Fund achieve strong, broad-based performance from its holdings over the last year. Q HOW DO YOU SELECT STOCKS FOR THE PORTFOLIO? A We seek to balance the Fund's portfolio between companies with economic advantages and companies which will perform well in any environment. When we look for investments, we look to invest in the underlying companies rather than the stocks. We engage in extensive analysis to gain a thorough understanding of each company we consider for investment. We research all aspects of a company going beyond its financial statements to examine its business plan and management's ability to execute the plan and achieve growth. This process typically requires hands-on research which often includes talking with management or visiting the company. In addition to evaluating a company's fundamentals, we use technical indicators to aid in the screening and decision making process. We may review and monitor a company for as long as 12 to 18 months before we make an investment. A crucial, but often overlooked, component of stock selection is knowing WHEN to sell a holding. Maintaining a solid sell discipline is critical for the Fund to benefit from current holdings and take advantage of new investment opportunities. We closely monitor each investment to determine when to sell part or all of a position. If an opportunity to sell arises and we believe the company still has long-term growth potential, we may simply take profits and trim the Fund's position. With the Fund's strong performance in 2004, we employed this strategy with a number of positions to help maintain a diversified portfolio and raise funds for new investment opportunities. We scaled back the Fund's holdings in companies such as FIRST CASH FINANCIAL SERVICES, EAST WEST BANK, INTERVOICE, and ELKCORP. In the future, we may increase the Fund's positions in these companies if we can purchase them at an attractive price as we recently did with First Cash Financial Services and ElkCorp. Q WHAT WILL BE THE KEY FACTORS AFFECTING MARKET PERFORMANCE IN THE REMAINDER OF THE YEAR? A The state of the economy always plays a key role in market performance. Low inflation coupled with modest job and spending growth paint a positive economic forecast for the remainder of the year. While the economy should continue to grow at a healthy pace, we expect other uncertainties will temper the effects of positive economic growth. Geopolitical concerns remain one of the biggest obstacles to a positive breakthrough in market performance. Continued instability in the Middle East as well as in certain parts of Africa and Latin America remains a primary concern. These concerns and the continued threat of terrorism will likely keep the market event-driven in the final half of the year. Rising energy prices will also continue to have a significant impact on the market. Long-term forecasts indicate demand, particularly in the U.S. and China, will continue to grow. At present, supply remains sufficient but instability in a number of major oil producing countries has given the market cause for concern. In addition, while higher energy prices are manageable at current levels, there is a growing concern that a further rise will begin to slow economic growth in the U.S. and around the world. Rising interest rates, the growing U.S. budget and trade deficits, along with uncertainty surrounding the outcome of the Presidential election, will likely increase market volatility in the coming months. Q WHAT OPPORTUNITIES EXIST FOR THE FUND IN THE CURRENT MARKET ENVIRONMENT? A Given these concerns and the absence of a major positive catalyst, we expect the market will remain event-driven in the remainder of the year. As a result, we expect to remain in a "stock 15 picker's" market where performance will be driven more by individual stocks than sectors. Stock selection will remain crucial to achieving good performance and managing risk. Despite their strong market performance in the last year, we believe small and mid cap stocks still have good growth potential. Most of these companies have managed debt and cash effectively to allow for sustained growth. In addition, their smaller size and leadership in niche industries gives them greater flexibility and market advantages in this economy. We believe the Fund is well positioned to build on the performance it achieved in the first half of the year. Even with solid growth in the last year, the stocks in the Fund's portfolio still possess good growth potential. We do not anticipate significant turnover in the Fund in the final half of the year, but we will continue to take profits and use market volatility to add to existing positions. We believe current market conditions will continue to provide opportunities to acquire companies with long-term growth potential at attractive prices. Given the expectation of heightened volatility, we will also continue to manage risk by maintaining a portion of the portfolio in more defensive positions. [CHART] INVESTMENT MIX as of 06/30/04 1. EQUITIES 100.00%
16 PACIFIC ADVISORS FUND INC. FINANCIAL STATEMENTS 17 PACIFIC ADVISORS GOVERNMENT SECURITIES FUND SCHEDULE OF INVESTMENTS (UNAUDITED) June 30, 2004
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------- US GOVERNMENT SECURITIES - 82.31% US Treasury Bills US Treasury Bill 07/01/04 $ 5,700,000 $ 5,700,000 US Treasury Bill 12/23/04 300,000 297,578 - --------------------------------------------------------------------------------------------------------------------- 5,997,578 - --------------------------------------------------------------------------------------------------------------------- US Government Agencies Federal Home Loan Bank 5.09% 10/22/12 180,000 178,539 Federal Home Loan Bank 5.125% 09/02/10 195,000 195,546 Federal Home Loan Bank 5.35% 12/24/12 1,475,000 1,474,254 Federal Home Loan Mortgage Association 5.00% 01/17/12 750,000 745,330 Federal Home Loan Mortgage Association 5.00% 07/30/09 155,000 155,352 Federal National Mortgage Association 4.50% 08/20/10 500,000 498,477 Federal National Mortgage Association 5.125% 02/27/13 90,000 89,160 - --------------------------------------------------------------------------------------------------------------------- 3,336,658 - --------------------------------------------------------------------------------------------------------------------- TOTAL US GOVERNMENT SECURITIES (Cost: $9,342,769) 9,334,236 ============== NUMBER OF SHARES VALUE - --------------------------------------------------------------------------------------------------------------------- COMMON STOCK - 2.02% Energy PPL Corporation 5,000 229,500 - --------------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost: $210,549) 229,500 ============== PREFERRED STOCK - 15.57% Banks - Regional Abbey National PLC Preferred B 7.375% 4,000 104,600 Bank One Capital I 8.00% 09/15/29 5,000 127,300 Chase Capital V 7.03% 10,000 250,100 Citigroup Capital VI 5,000 123,600 Citigroup Capital VII 7.125% 07/31/31 5,000 127,100 First Bancorp Puerto Rico Preferred C 7.40% 20,000 515,000 - --------------------------------------------------------------------------------------------------------------------- 1,247,700 - --------------------------------------------------------------------------------------------------------------------- Insurance - Life Phoenix Companies, Inc. 7.45% 01/15/32 1,500 37,125 - ---------------------------------------------------------------------------------------------------------------------
* Non-income producing SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 18
NUMBER OF SHARES VALUE - --------------------------------------------------------------------------------------------------------------------- PREFERRED STOCK CONTINUED Real Estate Investment Trusts Price Legacy Corporation Preferred A 8.75% 29,622 $ 481,358 - --------------------------------------------------------------------------------------------------------------------- TOTAL PREFERRED STOCK (Cost: $1,797,277) 1,766,183 ============== TOTAL INVESTMENT SECURITIES - 99.90% (Cost: $11,350,595) $ 11,329,919 ============== SHORT-TERM INVESTMENTS - 0.28% United Missouri Bank Money Market Fiduciary Account 31,411 OTHER ASSETS LESS LIABILITIES - (0.18%) (20,990) ============== TOTAL NET ASSETS - 100% $ 11,340,340 =====================================================================================================================
* Non-income producing SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 19 PACIFIC ADVISORS INCOME AND EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) June 30, 2004
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------- CORPORATE BONDS - 61.43% Banks - Regional Bank of America Corporation 6.00% 03/15/06 $ 20,000 $ 20,947 Bank One Corporation 7.25% 08/15/04 30,000 30,186 - --------------------------------------------------------------------------------------------------------------------- 51,133 - --------------------------------------------------------------------------------------------------------------------- Beverages Anheuser Busch 7.125% 07/01/17 165,000 182,117 Anheuser Busch 7.25% 09/15/15 188,000 200,957 - --------------------------------------------------------------------------------------------------------------------- 383,074 - --------------------------------------------------------------------------------------------------------------------- Cosmetic/Personal Care Scott Paper Company 10.00% 03/15/05 60,000 62,967 - --------------------------------------------------------------------------------------------------------------------- Electrical Northwestern Corporation 7.10% 08/01/05 125,000 125,000 - --------------------------------------------------------------------------------------------------------------------- Entertainment Time Warner, Inc. 8.11% 08/15/06 100,000 109,047 - --------------------------------------------------------------------------------------------------------------------- Financial Services Boeing Capital Corporation 7.375% 09/27/10 100,000 113,074 General Motors Acceptance Corporation 8.75% 07/15/05 95,000 100,166 - --------------------------------------------------------------------------------------------------------------------- 213,240 - --------------------------------------------------------------------------------------------------------------------- Financial Services - Diversified General Electric Capital Floating Rate Note 01/01/49 75,000 74,761 General Electric Capital 8.50% 07/24/08 46,000 53,323 General Electric Capital 8.65% 05/15/09 40,000 46,784 General Electric Capital 8.875% 05/15/09 50,000 59,322 - --------------------------------------------------------------------------------------------------------------------- 234,190 - --------------------------------------------------------------------------------------------------------------------- Food Retailers Safeway, Inc. 9.875% 03/15/07 311,000 356,125 - --------------------------------------------------------------------------------------------------------------------- Gas Piedmont National Gas Company 7.80% 09/29/10 250,000 293,088 - --------------------------------------------------------------------------------------------------------------------- Heavy Machinery Deere & Company 8.95% 06/15/19 183,000 215,911 - --------------------------------------------------------------------------------------------------------------------- Industrial Caterpillar, Inc. 9.375% 08/15/11 94,000 120,660 - --------------------------------------------------------------------------------------------------------------------- Insurance - Full Line American General Financial 5.875% 12/15/05 100,000 104,552 American General Financial 8.125% 08/15/09 91,000 105,006 Transamerica Corporation 9.375% 03/01/08 85,000 98,665 - --------------------------------------------------------------------------------------------------------------------- 308,223 - --------------------------------------------------------------------------------------------------------------------- Media Liberty Media Corporation 7.75% 07/15/09 519,000 579,550 - ---------------------------------------------------------------------------------------------------------------------
* Non-income producing SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 20
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------- CORPORATE BONDS CONTINUED Medical Johnson & Johnson 8.72% 11/01/24 $ 140,000 $ 148,687 - --------------------------------------------------------------------------------------------------------------------- Oil - Integrated Majors Enron Oil and Gas 6.50% 09/15/04 225,000 227,077 Texaco Capital 8.625% 06/30/10 170,000 208,329 - --------------------------------------------------------------------------------------------------------------------- 435,406 - --------------------------------------------------------------------------------------------------------------------- Retailers - Broadline Wal-Mart Stores 8.00% 09/15/06 50,000 54,970 - --------------------------------------------------------------------------------------------------------------------- Semiconductor & Related Gerber Products 9.00% 10/15/06 120,000 133,303 - --------------------------------------------------------------------------------------------------------------------- Telephone Systems Bellsouth Capital Funding Corporation 6.04% 11/15/26 85,000 90,737 Bellsouth Telecommunications 6.30% 12/15/15 251,125 269,675 GTE Hawaiian Telecom 6.75% 02/15/05 100,000 101,650 SBC Communications 6.59% 09/29/08 35,000 37,566 SBC Communications 7.35% 05/24/10 275,000 311,618 SBC Communications 7.39% 05/24/10 155,000 173,843 Wisconsin Bell 6.35% 12/01/26 50,000 53,577 - --------------------------------------------------------------------------------------------------------------------- 1,038,666 - --------------------------------------------------------------------------------------------------------------------- Transportation Norfolk Southern Corporation 7.40% 09/15/06 135,000 146,521 - --------------------------------------------------------------------------------------------------------------------- Utilities - Electric Commonwealth Edison 8.00% 05/15/08 305,000 346,340 Pennsylvania Power & Light 6.55% 03/01/06 75,000 79,099 Potomac Electric Power 6.25% 10/15/07 165,000 176,833 Potomac Electric Power 6.50% 09/15/05 115,000 119,646 Public Service Electric & Gas 6.75% 03/01/06 375,000 397,316 Public Service Oklahoma 6.50% 06/01/05 95,000 98,264 - --------------------------------------------------------------------------------------------------------------------- 1,217,498 - --------------------------------------------------------------------------------------------------------------------- TOTAL CORPORATE BONDS (Cost: $6,226,423) 6,227,259 ============== NUMBER OF SHARES VALUE - --------------------------------------------------------------------------------------------------------------------- COMMON STOCK - 18.12% Aluminum Alcoa, Inc. 1,000 33,030 - --------------------------------------------------------------------------------------------------------------------- Automobile Parts Genuine Parts Company 2,000 79,360 - --------------------------------------------------------------------------------------------------------------------- Banks - Money Center Bank of America 1,000 84,620 - ---------------------------------------------------------------------------------------------------------------------
* Non-income producing SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 21
NUMBER OF SHARES VALUE - --------------------------------------------------------------------------------------------------------------------- COMMON STOCK CONTINUED Banks - Regional Wilmington Trust Company 1,000 $ 37,220 - --------------------------------------------------------------------------------------------------------------------- Chemicals - Specialty International Flavors and Fragrances 2,000 74,800 - --------------------------------------------------------------------------------------------------------------------- Diversified Companies General Electric 2,000 64,800 - --------------------------------------------------------------------------------------------------------------------- Electric Dominion Resources 1,000 63,080 - --------------------------------------------------------------------------------------------------------------------- Financial Services - Specialty Federal Home Loan Mortgage Association 2,000 126,600 - --------------------------------------------------------------------------------------------------------------------- Gas British Petroleum 1,000 53,570 - --------------------------------------------------------------------------------------------------------------------- Healthcare Provider HCA, Inc. 1,000 41,590 - --------------------------------------------------------------------------------------------------------------------- Industrial Diversified Tyco International Ltd. 2,000 66,280 - --------------------------------------------------------------------------------------------------------------------- Insurance - Property American International Group, Inc. 1,000 71,280 Chubb Corporation 500 34,090 - --------------------------------------------------------------------------------------------------------------------- 105,370 - --------------------------------------------------------------------------------------------------------------------- Medical & Biotechnology Johnson & Johnson 3,000 167,100 - --------------------------------------------------------------------------------------------------------------------- Mining - Diversified Anglogold Ltd.* 1,000 32,160 Freeport Mcmoran* 1,000 33,150 - --------------------------------------------------------------------------------------------------------------------- 65,310 - --------------------------------------------------------------------------------------------------------------------- Non-Ferrous Metals Phelps Dodge Corporation* 1,000 77,510 - --------------------------------------------------------------------------------------------------------------------- Paper Products International Paper 1,000 44,700 - --------------------------------------------------------------------------------------------------------------------- Pharmaceuticals Pfizer, Inc. 2,500 85,700 - --------------------------------------------------------------------------------------------------------------------- Pipelines El Paso Energy Corporation 1,000 7,880 - --------------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts Hospitality Properties 11,500 486,450 - ---------------------------------------------------------------------------------------------------------------------
* Non-income producing SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 22
NUMBER OF SHARES VALUE - --------------------------------------------------------------------------------------------------------------------- COMMON STOCK CONTINUED Utilities American Electric Power Company, Inc. 1,000 $ 32,000 Public Service Enterprise Group, Inc. 1,000 40,030 - --------------------------------------------------------------------------------------------------------------------- 72,030 - --------------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost: $1,816,824) 1,837,000 ============== PREFERRED STOCK - 10.86% Banks - Regional Bank One Capital I 8.00% 09/15/29 2,000 50,920 Chase Capital V 7.03% 2,000 50,020 Citigroup Capital VI 2,000 49,440 Citigroup Capital IX 6.00% 2,000 45,120 Citigroup Capital VII 7.125% 07/31/31 2,000 50,840 First Bancorp Puerto Rico Preferred C 7.40% 10,000 257,500 - --------------------------------------------------------------------------------------------------------------------- 503,840 - --------------------------------------------------------------------------------------------------------------------- Insurance - Full Line ING Capital Funding Trust II 2,500 65,900 - --------------------------------------------------------------------------------------------------------------------- Insurance - Life American General Preferred C 7.875% 1,000 25,130 Phoenix Companies, Inc. 7.45% 01/15/32 3,500 86,625 Westpac Capital Trust I 8.00% 3,000 75,420 - --------------------------------------------------------------------------------------------------------------------- 187,175 - --------------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts Price Legacy Corporation Preferred A 8.75% 21,158 343,818 - --------------------------------------------------------------------------------------------------------------------- TOTAL PREFERRED STOCK (Cost: $1,100,910) 1,100,733 ============== PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------- US GOVERNMENT SECURITIES - 4.70% US Government Agencies Federal Farm Credit Bank 5.05% 02/14/13 $ 230,000 227,570 Federal Home Loan Mortgage Association 3.25% 05/17/07 250,000 248,622 - --------------------------------------------------------------------------------------------------------------------- TOTAL US GOVERNMENT SECURITIES (Cost: $481,312) 476,192 ============== TOTAL INVESTMENT SECURITIES - 95.11% (Cost: $9,625,469) $ 9,641,184 ============== SHORT-TERM INVESTMENTS - 4.22% United Missouri Bank Money Market Fiduciary Account 427,924 OTHER ASSETS LESS LIABILITIES - 0.67% 68,509 ============== TOTAL NET ASSETS - 100% $ 10,137,617 =====================================================================================================================
* Non-income producing SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 23 PACIFIC ADVISORS BALANCED FUND SCHEDULE OF INVESTMENTS (UNAUDITED) June 30, 2004
NUMBER OF SHARES VALUE - --------------------------------------------------------------------------------------------------------------------- COMMON STOCK - 52.98% Advertising Interpublic Group* 30,000 $ 411,900 - --------------------------------------------------------------------------------------------------------------------- Aerospace & Defense Boeing Company 7,500 383,175 - --------------------------------------------------------------------------------------------------------------------- Banks Banco Latinamericano De Exportaciones 35,000 548,800 Washington Mutual 7,500 289,800 - --------------------------------------------------------------------------------------------------------------------- 838,600 - --------------------------------------------------------------------------------------------------------------------- Biotechnology Cambrex Corporation 16,000 403,680 Mylan Labs 12,000 243,000 - --------------------------------------------------------------------------------------------------------------------- 646,680 - --------------------------------------------------------------------------------------------------------------------- Chemicals - Specialty Cabot Micro Electronics, Inc.* 13,000 397,930 - --------------------------------------------------------------------------------------------------------------------- Communications Automatic Data Processing 6,000 251,280 Nokia Corporation ADR 20,000 290,800 - --------------------------------------------------------------------------------------------------------------------- 542,080 - --------------------------------------------------------------------------------------------------------------------- Diversified Companies General Electric 15,000 486,000 SPX Corporation 8,000 371,520 - --------------------------------------------------------------------------------------------------------------------- 857,520 - --------------------------------------------------------------------------------------------------------------------- Electric Allete, Inc. 10,000 333,000 Duke Energy Corporation 17,500 355,075 First Energy Corporation 9,000 336,690 - --------------------------------------------------------------------------------------------------------------------- 1,024,765 - --------------------------------------------------------------------------------------------------------------------- Energy Suncor Energy, Inc. 12,000 307,320 - --------------------------------------------------------------------------------------------------------------------- Entertainment AT&T - Liberty Media Group Class A* 30,000 269,700 Disney* 10,000 254,900 Liberty Media International, Inc. 6,000 222,600 Viacom, Inc. 7,500 267,900 - --------------------------------------------------------------------------------------------------------------------- 1,015,100 - --------------------------------------------------------------------------------------------------------------------- Financial Services H&R Block 8,000 381,440 - --------------------------------------------------------------------------------------------------------------------- Financial Services - Specialty Federal Home Loan Mortgage Association 6,000 379,800 - ---------------------------------------------------------------------------------------------------------------------
* Non-income producing SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 24
NUMBER OF SHARES VALUE - --------------------------------------------------------------------------------------------------------------------- COMMON STOCK CONTINUED Food Cadbury Schweppes 9,000 $ 315,720 - --------------------------------------------------------------------------------------------------------------------- Forest Products Rayonier, Inc. 10,683 474,859 - --------------------------------------------------------------------------------------------------------------------- Gas Prima Energy 8,000 316,560 - --------------------------------------------------------------------------------------------------------------------- Gas - Integrated British Petroleum 7,500 401,775 - --------------------------------------------------------------------------------------------------------------------- Industrial Cubic Corporation 12,000 251,160 - --------------------------------------------------------------------------------------------------------------------- Industrial - Diversified Tyco International Ltd. 15,000 497,100 - --------------------------------------------------------------------------------------------------------------------- Industrial & Commercial Services GATX Corporation 15,000 408,000 Reliance Steel 8,000 322,560 - --------------------------------------------------------------------------------------------------------------------- 730,560 - --------------------------------------------------------------------------------------------------------------------- Insurance - Full Line Berkshire Hathaway, Inc. - Class A* 4 355,800 Marsh & McLennan 6,000 272,280 - --------------------------------------------------------------------------------------------------------------------- 628,080 - --------------------------------------------------------------------------------------------------------------------- Insurance - Life MetLife, Inc.* 7,500 268,875 - --------------------------------------------------------------------------------------------------------------------- Insurance - Property Chubb Corporation 4,000 272,720 - --------------------------------------------------------------------------------------------------------------------- Oilfield Equipment Services Cooper Cameron* 6,000 292,200 - --------------------------------------------------------------------------------------------------------------------- Media Time Warner* 18,000 316,440 - --------------------------------------------------------------------------------------------------------------------- Medical & Biotechnology Bristol Myers Squibb Company 15,000 367,500 Inverness Medical Innovations, Inc.* 15,000 328,500 Johnson & Johnson 5,000 278,500 Wyeth 6,000 216,960 - --------------------------------------------------------------------------------------------------------------------- 1,191,460 - --------------------------------------------------------------------------------------------------------------------- Medical Equipment Perkin Elmer 12,000 240,480 - --------------------------------------------------------------------------------------------------------------------- Mining - Diversified Rio Tinto PLC 4,000 392,200 - ---------------------------------------------------------------------------------------------------------------------
* Non-income producing SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 25
NUMBER OF SHARES VALUE - --------------------------------------------------------------------------------------------------------------------- COMMON STOCK CONTINUED Pharmaceuticals Pfizer, Inc. 12,000 $ 411,360 Pharmaceutical Resources, Inc.* 6,000 211,260 - --------------------------------------------------------------------------------------------------------------------- 622,620 - --------------------------------------------------------------------------------------------------------------------- Pipelines Williams Companies, Inc. 30,000 357,000 - --------------------------------------------------------------------------------------------------------------------- Publishing Moodys Corporation 5,000 323,300 R H Donnelley Corporation* 5,000 218,700 - --------------------------------------------------------------------------------------------------------------------- 542,000 - --------------------------------------------------------------------------------------------------------------------- Real Estate Investment Trusts Catellus Development Corporation 13,946 343,769 - --------------------------------------------------------------------------------------------------------------------- Retailers - Specialty Hot Topic, Inc. 10,000 204,900 Michaels Stores, Inc. 5,000 275,000 - --------------------------------------------------------------------------------------------------------------------- 479,900 - --------------------------------------------------------------------------------------------------------------------- Software & Computer Processing Equipment Microsoft* 15,000 428,400 Reynolds & Reynolds 10,000 231,300 - --------------------------------------------------------------------------------------------------------------------- 659,700 - --------------------------------------------------------------------------------------------------------------------- Technology Lucent Technologies* 35,000 132,300 - --------------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost: $12,955,565) 16,913,788 ============== PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------- CORPORATE BONDS - 40.96% Aluminum Reynolds Metals 9.20% 04/24/06 $ 200,000 220,310 - --------------------------------------------------------------------------------------------------------------------- Banks - Regional Bank of America Corporation 6.00% 03/15/06 100,000 104,733 Bank One Corporation 7.25% 08/15/04 78,000 78,485 - --------------------------------------------------------------------------------------------------------------------- 183,218 - --------------------------------------------------------------------------------------------------------------------- Beverages Anheuser Busch 7.25% 09/15/15 620,000 662,730 - --------------------------------------------------------------------------------------------------------------------- Computers & Related Equipment Sun Microsystems 7.35% 08/15/04 139,000 139,719 - ---------------------------------------------------------------------------------------------------------------------
* Non-income producing SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 26
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------- CORPORATE BONDS CONTINUED Financial Services Beneficial Corporation 8.40% 05/15/08 $ 155,000 $ 176,597 Boeing Capital Corporation 7.375% 09/27/10 300,000 339,221 General Electric Capital Floating Rate Note 09/01/48 275,000 274,029 General Electric Capital 8.125% 05/15/12 269,000 316,404 General Electric Capital 8.30% 09/20/09 270,000 316,309 General Motors Acceptance Corporation 8.75% 07/15/05 520,000 540,720 - --------------------------------------------------------------------------------------------------------------------- 1,963,280 - --------------------------------------------------------------------------------------------------------------------- Food Retailers Safeway, Inc. 6.85% 09/15/04 80,000 80,669 Safeway, Inc. 9.30% 02/01/07 499,000 561,255 Safeway, Inc. 9.875% 03/15/07 580,000 664,156 - --------------------------------------------------------------------------------------------------------------------- 1,306,080 - --------------------------------------------------------------------------------------------------------------------- Heavy Machinery Deere & Company 8.95% 06/15/19 173,000 204,113 - --------------------------------------------------------------------------------------------------------------------- Industrial Tyco International Group 5.875% 11/01/04 458,000 463,338 Tyco International Group 6.375% 06/15/05 369,000 380,418 - --------------------------------------------------------------------------------------------------------------------- 843,756 - --------------------------------------------------------------------------------------------------------------------- Insurance - Full Line Cigna Corporation 7.40% 05/15/07 400,000 436,685 Old Republic International 7.00% 06/15/07 325,000 355,245 Transamerica Corporation 9.375% 03/01/08 300,000 348,230 - --------------------------------------------------------------------------------------------------------------------- 1,140,160 - --------------------------------------------------------------------------------------------------------------------- Media Seagrams & Sons 7.00% 04/15/08 310,000 325,064 - --------------------------------------------------------------------------------------------------------------------- Medical Equipment Mallinckrodt 6.50% 11/15/07 380,000 409,024 - --------------------------------------------------------------------------------------------------------------------- Oil - Integrated Majors Atlantic Richfield 9.125% 03/01/11 300,000 373,828 Enron Oil & Gas 6.50% 09/15/04 675,000 681,232 Enron Oil & Gas 6.70% 11/15/06 107,000 115,624 - --------------------------------------------------------------------------------------------------------------------- 1,170,684 - --------------------------------------------------------------------------------------------------------------------- Recreational International Game Technology 8.375% 05/15/09 315,000 370,578 - --------------------------------------------------------------------------------------------------------------------- Semiconductor & Related Products Gerber Products 9.00% 10/15/06 409,000 454,342 - ---------------------------------------------------------------------------------------------------------------------
* Non-income producing SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 27
PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------- CORPORATE BONDS CONTINUED Telephone Systems AT&T Corporation 8.35% 01/15/25 $ 420,000 $ 425,113 Bellsouth Telecommunications 6.30% 12/15/15 538,125 577,875 GTE Corporation 8.75% 11/01/21 389,000 470,670 GTE South, Inc. 6.125% 06/15/07 100,000 106,657 New England Telephone & Telecommunications 6.875% 10/01/23 135,000 136,016 - --------------------------------------------------------------------------------------------------------------------- 1,716,331 - --------------------------------------------------------------------------------------------------------------------- Utilities - Electric Florida Power & Light 6.00% 06/01/08 175,000 187,008 Niagara Mohawk Power 9.75% 11/01/05 520,000 566,050 Northwestern Corporation 7.00% 08/15/23 250,000 231,250 Northwestern Corporation 7.10% 08/01/05 325,000 325,000 Potomac Electric Power 6.25% 10/15/07 200,000 214,343 Public Service Electric & Gas 6.75% 03/01/06 250,000 264,878 Reliant Energy Mid Atlantic 9.237% 07/02/17 49,281 52,934 Toledo Edison Company 7.875% 08/01/04 124,000 124,504 - --------------------------------------------------------------------------------------------------------------------- 1,965,967 - --------------------------------------------------------------------------------------------------------------------- TOTAL CORPORATE BONDS (Cost: $13,065,270) 13,075,356 ============== US GOVERNMENT SECURITIES - 0.63% US Government Agencies Federal Home Loan Bank 6.75% 08/10/16 100,000 100,505 Federal Home Loan Mortgage Association 6.25% 08/15/16 100,000 100,486 - --------------------------------------------------------------------------------------------------------------------- 200,991 - --------------------------------------------------------------------------------------------------------------------- TOTAL US GOVERNMENT SECURITIES (Cost: $200,950) 200,991 ============== NUMBER OF SHARES VALUE - --------------------------------------------------------------------------------------------------------------------- PREFERRED STOCK - 2.58% Real Estate Investment Trusts Price Legacy Corporation Preferred A 8.75% 50,780 825,175 - --------------------------------------------------------------------------------------------------------------------- TOTAL PREFERRED STOCK (Cost: $761,202) 825,175 ============== TOTAL INVESTMENT SECURITIES - 97.15% (Cost: $26,982,987) $ 31,015,310 ============== SHORT-TERM INVESTMENTS - 2.31% United Missouri Bank Money Market Fiduciary Account 737,709 OTHER ASSETS LESS LIABILITIES - 0.54% 173,017 ============== TOTAL NET ASSETS - 100% $ 31,926,036 =====================================================================================================================
* Non-income producing SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 28 PACIFIC ADVISORS GROWTH FUND SCHEDULE OF INVESTMENTS (UNAUDITED) June 30, 2004
NUMBER OF SHARES VALUE - --------------------------------------------------------------------------------------------------------------------- COMMON STOCK - 87.64% Banks - Regional Sovereign Bancorp, Inc.* 1,000 $ 22,100 - --------------------------------------------------------------------------------------------------------------------- Biotechnology Cambrex Corporation 500 12,615 - --------------------------------------------------------------------------------------------------------------------- Chemicals - Specialty Hercules, Inc.* 1,000 12,190 - --------------------------------------------------------------------------------------------------------------------- Commercial Services Tetra Tech, Inc.* 1,250 20,400 - --------------------------------------------------------------------------------------------------------------------- Communications HSBC Holding PLC 160 11,986 - --------------------------------------------------------------------------------------------------------------------- Computers & Related Equipment International Business Machines 200 17,630 Intervoice, Inc. 2,000 22,940 - --------------------------------------------------------------------------------------------------------------------- 40,570 - --------------------------------------------------------------------------------------------------------------------- Containers/Packaging Pactiv Corporation* 500 12,470 - --------------------------------------------------------------------------------------------------------------------- Diversified Companies General Electric 1,000 32,400 ITT Industries 300 24,900 - --------------------------------------------------------------------------------------------------------------------- 57,300 - --------------------------------------------------------------------------------------------------------------------- Electrical Qualcomm, Inc. 500 36,490 - --------------------------------------------------------------------------------------------------------------------- Forest Products Louisiana Pacific Corporation 2,000 47,300 - --------------------------------------------------------------------------------------------------------------------- Health Care Provider America Service Group* 1,501 52,160 - --------------------------------------------------------------------------------------------------------------------- Home Furnishings Furniture Brands International, Inc. 500 12,525 - --------------------------------------------------------------------------------------------------------------------- Industrial - Diversified Tyco International, Ltd. 1,000 33,140 - --------------------------------------------------------------------------------------------------------------------- Insurance - Specialty Caremark Rx, Inc. 1,935 63,739 - --------------------------------------------------------------------------------------------------------------------- Medical & Biotechnology Johnson & Johnson 800 44,560 McKesson Corporation HBOC, Inc. 500 17,165 Quest Diagnostics, Inc. 300 25,485 - --------------------------------------------------------------------------------------------------------------------- 87,210 - ---------------------------------------------------------------------------------------------------------------------
* Non-income producing SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 29
NUMBER OF SHARES VALUE - --------------------------------------------------------------------------------------------------------------------- COMMON STOCK CONTINUED Medical Equipment, Devices & Supplies Becton, Dickinson and Company 500 $ 25,900 St. Jude Medical, Inc.* 1,000 75,650 Zimmer Holdings, Inc.* 500 44,100 - --------------------------------------------------------------------------------------------------------------------- 145,650 - --------------------------------------------------------------------------------------------------------------------- Media Cox Communications* 1,000 27,790 - --------------------------------------------------------------------------------------------------------------------- Mining - Diversified Anglogold, Ltd. 1,000 32,160 Freeport Mcmoran* 500 16,575 - --------------------------------------------------------------------------------------------------------------------- 48,735 - --------------------------------------------------------------------------------------------------------------------- Non-Ferrous Metals Phelps Dodge Corporation* 500 38,755 - --------------------------------------------------------------------------------------------------------------------- Oil - Integrated Majors Apache Corporation 1,000 43,550 Exxon Mobil Corporation 400 17,764 - --------------------------------------------------------------------------------------------------------------------- 61,314 - --------------------------------------------------------------------------------------------------------------------- Paper Products Georgia Pacific Corporation 1,000 36,980 - --------------------------------------------------------------------------------------------------------------------- Pharmaceuticals Pfizer, Inc. 1,200 41,136 - --------------------------------------------------------------------------------------------------------------------- Restaurants AppleBee's International 1,125 25,897 - --------------------------------------------------------------------------------------------------------------------- Retailers - Specialty Linens 'n Things, Inc.* 1,000 29,310 - --------------------------------------------------------------------------------------------------------------------- Software & Computer Processing Equipment Oracle Corporation* 800 9,544 Siebel Systems, Inc.* 500 5,340 - --------------------------------------------------------------------------------------------------------------------- 14,884 - --------------------------------------------------------------------------------------------------------------------- Technology Andrew Corporation* 1,000 20,010 - --------------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost: $887,805) 1,012,656 ============== TOTAL INVESTMENT SECURITIES - 87.64% (Cost: $887,805) $ 1,012,656 ============== SHORT-TERM INVESTMENTS - 14.84% United Missouri Bank Money Market Fiduciary Account 171,430 OTHER ASSETS LESS LIABILITIES - (2.48%) (28,554) ============== TOTAL NET ASSETS - 100% $ 1,155,532 =====================================================================================================================
* Non-income producing SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 30 PACIFIC ADVISORS MULTI-CAP VALUE FUND SCHEDULE OF INVESTMENTS (UNAUDITED) June 30, 2004
NUMBER OF SHARES VALUE - --------------------------------------------------------------------------------------------------------------------- COMMON STOCK - 98.00% Banks - Regional JP Morgan 5,000 $ 193,850 Washington Mutual 5,000 193,200 - --------------------------------------------------------------------------------------------------------------------- 387,050 - --------------------------------------------------------------------------------------------------------------------- Building Materials Home Depot, Inc. 6,000 211,200 - --------------------------------------------------------------------------------------------------------------------- Communications AT&T Corporation 8,000 117,040 Comcast Corporation* 5,955 166,919 - --------------------------------------------------------------------------------------------------------------------- 283,959 - --------------------------------------------------------------------------------------------------------------------- Computers & Related Equipment Cisco Systems, Inc.* 10,000 237,000 International Business Machines 2,000 176,300 Unisys Corporation* 13,000 180,440 - --------------------------------------------------------------------------------------------------------------------- 593,740 - --------------------------------------------------------------------------------------------------------------------- Consumer Services Cendant Corporation 5,000 122,400 - --------------------------------------------------------------------------------------------------------------------- Electrical Components & Equipment Arrow Electronics, Inc.* 8,000 214,560 - --------------------------------------------------------------------------------------------------------------------- Energy Chevron Texaco Corporation 1,500 141,165 Marathon Oil Corporation 6,000 227,040 - --------------------------------------------------------------------------------------------------------------------- 368,205 - --------------------------------------------------------------------------------------------------------------------- Entertainment Activision, Inc.* 7,500 119,250 - --------------------------------------------------------------------------------------------------------------------- Financial Services Federal Home Loan Mortgage Association 3,500 221,550 Nationwide Financial Services, Inc. 4,500 169,245 - --------------------------------------------------------------------------------------------------------------------- 390,795 - --------------------------------------------------------------------------------------------------------------------- Golfing Equipment Callaway Golf Company 8,000 90,720 - --------------------------------------------------------------------------------------------------------------------- Industrial Metrologic Instruments* 12,000 239,280 - --------------------------------------------------------------------------------------------------------------------- Insurance - Full Line Lincoln National Corporation 3,500 165,375 - --------------------------------------------------------------------------------------------------------------------- Investment Companies Goldman Sachs Group, Inc. 1,000 94,160 - --------------------------------------------------------------------------------------------------------------------- Medical & Biotechnology Bristol Myers Squibb Company 5,000 122,500 Serlogicals Corporation* 11,500 229,885 - --------------------------------------------------------------------------------------------------------------------- 652,385 - --------------------------------------------------------------------------------------------------------------------- Medical Equipment & Supplies Closure Medical 7,000 175,770 - ---------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 31
NUMBER OF SHARES VALUE - --------------------------------------------------------------------------------------------------------------------- COMMON STOCK CONTINUED Non-Ferrous Metals Phelps Dodge Corporation* 3,200 $ 248,032 - --------------------------------------------------------------------------------------------------------------------- Oilfield Equipment Services Schlumberger 2,500 158,775 - --------------------------------------------------------------------------------------------------------------------- Pharmaceuticals Endo Pharmaceuticals* 10,000 234,500 Pfizer, Inc. 5,000 171,400 Schering-Plough Corporation 12,000 221,760 Watson Pharmaceuticals* 5,000 134,500 - --------------------------------------------------------------------------------------------------------------------- 762,160 - --------------------------------------------------------------------------------------------------------------------- Pipelines Williams Companies, Inc. 19,000 226,100 - --------------------------------------------------------------------------------------------------------------------- Retailers - Broadline Pier 1 Imports, Inc. 6,000 106,140 Target Corporation 4,500 191,115 - --------------------------------------------------------------------------------------------------------------------- 297,255 - --------------------------------------------------------------------------------------------------------------------- Retailers - Drug Based Sola International, Inc.* 13,000 223,990 - --------------------------------------------------------------------------------------------------------------------- Retailers - Specialty Radio Shack* 2,500 71,575 - --------------------------------------------------------------------------------------------------------------------- Semiconductor & Related Intel Corporation 6,000 165,600 - --------------------------------------------------------------------------------------------------------------------- Software & Computer Processing Equipment Microsoft* 7,000 199,920 - --------------------------------------------------------------------------------------------------------------------- Technology Lucent Technologies* 50,000 189,000 - --------------------------------------------------------------------------------------------------------------------- Telephone Systems Bellsouth* 6,500 170,430 SBC Communications 7,500 181,875 - --------------------------------------------------------------------------------------------------------------------- 352,305 - --------------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost: $6,064,893) 6,703,561 ============== TOTAL INVESTMENT SECURITIES - 98.00% (Cost: $6,064,893) $ 6,703,561 ============== SHORT-TERM INVESTMENTS - 2.30% United Missouri Bank Money Market Fiduciary Account 157,157 OTHER ASSETS LESS LIABILITIES - (0.30%) (20,237) ============== TOTAL NET ASSETS - 100% $ 6,840,481 =====================================================================================================================
* Non-income producing SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 32 PACIFIC ADVISORS SMALL CAP FUND SCHEDULE OF INVESTMENTS (UNAUDITED) June 30, 2004
NUMBER OF SHARES VALUE - --------------------------------------------------------------------------------------------------------------------- COMMON STOCK - 103.52% Aerospace & Defense Aviall, Inc.* 22,500 $ 427,725 - --------------------------------------------------------------------------------------------------------------------- Apparel Ashworth, Inc.* 40,000 332,400 - --------------------------------------------------------------------------------------------------------------------- Auto - Retail Sonic Automotive, Inc. 23,000 509,450 - --------------------------------------------------------------------------------------------------------------------- Auto Parts Keystone Automotive Industries, Inc.* 14,000 390,460 Titan International, Inc. 68,500 704,865 - --------------------------------------------------------------------------------------------------------------------- 1,095,325 - --------------------------------------------------------------------------------------------------------------------- Banks - Regional East West Bancorp, Inc. 12,000 368,400 Nara Bank National Association 20,000 342,600 - --------------------------------------------------------------------------------------------------------------------- 711,000 - --------------------------------------------------------------------------------------------------------------------- Building Materials Carlisle Holdings Ltd.* 40,000 263,600 ElkCorp 21,000 502,740 - --------------------------------------------------------------------------------------------------------------------- 766,340 - --------------------------------------------------------------------------------------------------------------------- Commercial Services Darling International, Inc. 30,000 126,000 Team, Inc.* 20,000 323,800 Tetra Tech, Inc. 20,000 326,400 - --------------------------------------------------------------------------------------------------------------------- 776,200 - --------------------------------------------------------------------------------------------------------------------- Computers & Related Equipment Intervoice, Inc.* 85,410 979,653 Tyler Technologies* 46,000 435,160 - --------------------------------------------------------------------------------------------------------------------- 1,414,813 - --------------------------------------------------------------------------------------------------------------------- Consumer Services Service Corporation International* 40,000 294,800 - --------------------------------------------------------------------------------------------------------------------- Containers/Packaging Mobile Mini, Inc.* 20,000 568,200 - --------------------------------------------------------------------------------------------------------------------- Electrical Components & Equipment Bell Microproducts, Inc.* 35,000 283,150 - --------------------------------------------------------------------------------------------------------------------- Food Monterey Pasta Company * 25,000 91,000 - --------------------------------------------------------------------------------------------------------------------- Footwear Genesco, Inc.* 12,000 283,560 - ---------------------------------------------------------------------------------------------------------------------
* Non-income producing SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 33
NUMBER OF SHARES VALUE - --------------------------------------------------------------------------------------------------------------------- COMMON STOCK CONTINUED Gas - Integrated Denbury Resources, Inc.* 24,000 $ 502,800 - --------------------------------------------------------------------------------------------------------------------- Golfing Equipment Callaway Golf Company 22,000 249,480 - --------------------------------------------------------------------------------------------------------------------- Healthcare Provider America Service Group* 22,000 764,500 United American Health Care* 95,000 489,250 - --------------------------------------------------------------------------------------------------------------------- 1,253,750 - --------------------------------------------------------------------------------------------------------------------- Insurance - Full Line Gainsco, Inc.* 20,000 14,000 - --------------------------------------------------------------------------------------------------------------------- Metal Processing Commercial Metals Corporation* 13,000 421,850 - --------------------------------------------------------------------------------------------------------------------- Office Equipment Danka Business Systems 60,000 271,200 - --------------------------------------------------------------------------------------------------------------------- Oil - Drilling Harvest Natural Resources* 26,000 387,660 Mission Resources Corporation 60,000 342,000 - --------------------------------------------------------------------------------------------------------------------- 729,660 - --------------------------------------------------------------------------------------------------------------------- Oil - Integrated Majors Chesapeake Energy Corporation 17,000 250,240 Remington Oil & Gas Corporation* 11,000 259,600 - --------------------------------------------------------------------------------------------------------------------- 509,840 - --------------------------------------------------------------------------------------------------------------------- Oilfield Equipment & Services Mitcham Industries, Inc.* 70,000 359,800 - --------------------------------------------------------------------------------------------------------------------- Railroads Railamerica, Inc.* 70,000 1,022,000 - --------------------------------------------------------------------------------------------------------------------- Restaurants Dave and Busters, Inc. 14,000 263,060 - --------------------------------------------------------------------------------------------------------------------- Retailers - Specialty EZCorp, Inc. 32,000 317,440 First Cash Financial Services, Inc.* 21,000 446,880 - --------------------------------------------------------------------------------------------------------------------- 764,320 - --------------------------------------------------------------------------------------------------------------------- Semiconductor & Related Camtek Limited* 64,060 339,518 - --------------------------------------------------------------------------------------------------------------------- Software & Processing Carreker Corporation * 25,000 250,500 - --------------------------------------------------------------------------------------------------------------------- Telephone Systems Talk America Holdings, Inc.* 40,000 306,800 - ---------------------------------------------------------------------------------------------------------------------
* Non-income producing SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 34
NUMBER OF SHARES VALUE - --------------------------------------------------------------------------------------------------------------------- COMMON STOCK CONTINUED Transportation Frozen Food Express Industries, Inc.* 40,000 $ 274,400 SCS Transportation* 27,000 712,530 US Xpress Enterprises* 22,000 346,060 - --------------------------------------------------------------------------------------------------------------------- 1,332,990 - --------------------------------------------------------------------------------------------------------------------- TOTAL COMMON STOCK (Cost: $10,005,253) 16,145,531 ============== TOTAL INVESTMENT SECURITIES - 103.52% (Cost: $10,005,253) $ 16,145,531 ============== OTHER ASSETS LESS LIABILITIES - (3.52%) (548,368) ============== TOTAL NET ASSETS - 100% $ 15,597,163 =====================================================================================================================
* Non-income producing SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 35 PACIFIC ADVISORS FUND INC. STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) June 30, 2004
INCOME GOVERNMENT AND SECURITIES EQUITY FUND FUND -------------- -------------- ASSETS Investment Securities At cost $ 11,350,596 $ 9,625,469 ============== ============== At market value $ 11,329,919 $ 9,641,184 Short-term investments, at cost, which is equal to market 31,411 427,924 Accrued income receivable 39,492 129,892 Receivable for investments sold - - Receivable for capital shares sold 94 14,301 Other assets - - -------------- -------------- Total assets 11,400,916 10,213,301 -------------- -------------- LIABILITIES Bank Overdraft - - Payable for investments purchased - 44,250 Payable for fund shares redeemed 24,980 - Accounts payable 25,110 22,836 Accounts payable to related parties (Note 3) 4,945 5,876 Payable to Investment Manager (Note 3) 5,541 2,722 -------------- -------------- Total liabilities 60,576 75,684 -------------- -------------- NET ASSETS $ 11,340,340 $ 10,137,617 ============== ============== SUMMARY OF SHAREHOLDERS' EQUITY Paid in capital 12,281,639 10,120,789 Accumulated undistributed net investment income 18,759 12,719 Accumulated undistributed net realized gain (losses) on security transactions (939,380) (11,606) Net unrealized appreciation (depreciation) of investments (20,678) 15,715 -------------- -------------- Net assets at June 30, 2004 $ 11,340,340 $ 10,137,617 ============== ============== CLASS A: Net assets $ 2,640,458 $ 3,058,439 ============== ============== Shares authorized 50,000,000 50,000,000 Shares outstanding 277,965 297,170 Net asset value and redemption price per share $ 9.50 $ 10.29 ============== ============== Maximum offering price per share $ 9.97 $ 10.80 Sales load 4.75% 4.75% CLASS C: Net assets $ 8,699,882 $ 7,079,178 ============== ============== Shares authorized 50,000,000 50,000,000 Shares outstanding 940,228 717,437 Net asset value and redemption price per share $ 9.25 $ 9.87 ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 36
BALANCED GROWTH FUND FUND -------------- -------------- ASSETS Investment Securities At cost $ 26,982,988 $ 887,805 ============== ============== At market value $ 31,015,309 $ 1,012,656 Short-term investments, at cost, which is equal to market 737,709 171,430 Accrued income receivable 250,513 371 Receivable for investments sold - - Receivable for capital shares sold - - Other assets - - -------------- -------------- Total assets 32,003,531 1,184,457 -------------- -------------- LIABILITIES Bank Overdraft - - Payable for investments purchased - 24,777 Payable for fund shares redeemed - - Accounts payable 45,029 2,851 Accounts payable to related parties (Note 3) 13,093 1,297 Payable to Investment Manager (Note 3) 19,373 - -------------- -------------- Total liabilities 77,495 28,925 -------------- -------------- NET ASSETS $ 31,926,036 $ 1,155,532 ============== ============== SUMMARY OF SHAREHOLDERS' EQUITY Paid in capital 27,532,388 1,722,625 Accumulated undistributed net investment income 126,090 - Accumulated undistributed net realized gain (losses) on security transactions 235,237 (691,944) Net unrealized appreciation (depreciation) of investments 4,032,321 124,851 -------------- -------------- Net assets at June 30, 2004 $ 31,926,036 $ 1,155,532 ============== ============== CLASS A: Net assets $ 5,434,520 $ 878,230 ============== ============== Shares authorized 50,000,000 50,000,000 Shares outstanding 344,598 116,565 Net asset value and redemption price per share $ 15.77 $ 7.53 ============== ============== Maximum offering price per share $ 16.73 $ 7.99 Sales load 5.75% 5.75% CLASS C: Net assets $ 26,491,516 $ 277,302 ============== ============== Shares authorized 50,000,000 50,000,000 Shares outstanding 1,729,206 38,683 Net asset value and redemption price per share $ 15.32 $ 7.17 ============== ============== MULTI-CAP SMALL VALUE CAP FUND FUND -------------- -------------- ASSETS Investment Securities At cost $ 6,064,893 $ 10,005,253 ============== ============== At market value $ 6,703,560 $ 16,145,531 Short-term investments, at cost, which is equal to market 157,157 - Accrued income receivable 3,805 6,797 Receivable for investments sold - 12,928 Receivable for capital shares sold - 20,943 Other assets - - -------------- -------------- Total assets 6,864,522 16,186,199 -------------- -------------- LIABILITIES Bank Overdraft - 569,429 Payable for investments purchased - - Payable for fund shares redeemed - - Accounts payable 15,478 2,092 Accounts payable to related parties (Note 3) 4,732 8,390 Payable to Investment Manager (Note 3) 3,831 9,125 -------------- -------------- Total liabilities 24,041 589,036 -------------- -------------- NET ASSETS $ 6,840,481 $ 15,597,163 ============== ============== SUMMARY OF SHAREHOLDERS' EQUITY Paid in capital 6,064,507 9,279,777 Accumulated undistributed net investment income - - Accumulated undistributed net realized gain (losses) on security transactions 137,306 177,108 Net unrealized appreciation (depreciation) of investments 638,668 6,140,278 -------------- -------------- Net assets at June 30, 2004 $ 6,840,481 $ 15,597,163 ============== ============== CLASS A: Net assets $ 1,865,888 $ 13,362,677 ============== ============== Shares authorized 50,000,000 50,000,000 Shares outstanding 163,525 599,375 Net asset value and redemption price per share $ 11.41 $ 22.29 ============== ============== Maximum offering price per share $ 12.11 $ 23.65 Sales load 5.75% 5.75% CLASS C: Net assets $ 4,974,593 $ 2,234,486 ============== ============== Shares authorized 50,000,000 50,000,000 Shares outstanding 442,429 108,436 Net asset value and redemption price per share $ 11.24 $ 20.61 ============== ==============
37 STATEMENT OF OPERATIONS (UNAUDITED) For the period ended June 30, 2004
INCOME GOVERNMENT AND SECURITIES EQUITY FUND FUND -------------- -------------- INVESTMENT INCOME Dividends $ 56,989 $ 60,355 Interest 156,427 106,264 Misc Income - 80 -------------- -------------- Total Income 213,416 166,699 -------------- -------------- EXPENSES Investment Management Fees 40,909 33,385 Transfer Agent Fees 18,032 20,105 Fund Accounting Fees 31,306 21,879 Legal Fees 14,005 9,298 Audit Fees 8,811 6,232 Registration Fees 3,075 3,338 Printing 2,838 3,092 Custody Fees 4,406 4,418 Director Fees/Meetings 1,038 717 Distribution Fees (Note 3) 52,191 35,314 Other Expenses 4,569 3,505 -------------- -------------- Total Expenses, before reimbursements 181,180 141,283 Less fees waived and expenses reimbursed (Note 3) 35,368 30,663 -------------- -------------- Net Expenses 145,812 110,620 -------------- -------------- NET INVESTMENT INCOME (LOSS) 67,604 56,079 ============== ============== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized gain (loss) on investments (83,669) 37,329 Net Unrealized appreciation (depreciation) of investments (157,902) (108,240) -------------- -------------- (241,571) (70,911) -------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (173,967) $ (14,832) ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 38
BALANCED GROWTH FUND FUND -------------- -------------- INVESTMENT INCOME Dividends $ 170,767 $ 3,238 Interest 410,022 71 Misc Income - - -------------- -------------- Total Income 580,789 3,309 -------------- -------------- EXPENSES Investment Management Fees 113,159 3,906 Transfer Agent Fees 34,193 17,252 Fund Accounting Fees 76,948 8,017 Legal Fees 34,703 1,010 Audit Fees 21,123 729 Registration Fees 13,579 222 Printing 19,614 425 Custody Fees 6,035 3,277 Director Fees/Meetings 1,509 63 Distribution Fees (Note 3) 131,042 2,285 Other Expenses 10,515 379 -------------- -------------- Total Expenses, before reimbursements 462,420 37,565 Less fees waived and expenses reimbursed (Note 3) - 21,162 -------------- -------------- Net Expenses 462,420 16,403 -------------- -------------- NET INVESTMENT INCOME (LOSS) 118,369 (13,094) ============== ============== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized gain (loss) on investments 248,394 13,206 Net Unrealized appreciation (depreciation) of investments (687,060) 46,787 -------------- -------------- (438,666) 59,993 -------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (320,297) $ 46,899 ============== ============== MULTI-CAP SMALL VALUE CAP FUND FUND -------------- -------------- INVESTMENT INCOME Dividends $ 31,523 $ 14,037 Interest 604 116 Misc Income - - -------------- -------------- Total Income 32,127 14,153 -------------- -------------- EXPENSES Investment Management Fees 29,753 46,042 Transfer Agent Fees 18,667 38,333 Fund Accounting Fees 14,835 31,373 Legal Fees 6,843 14,119 Audit Fees 4,165 8,594 Registration Fees 2,897 13,870 Printing 2,206 17,517 Custody Fees 3,870 6,308 Director Fees/Meetings 504 1,143 Distribution Fees (Note 3) 23,503 21,647 Other Expenses 2,428 4,297 -------------- -------------- Total Expenses, before reimbursements 109,671 203,243 Less fees waived and expenses reimbursed (Note 3) 14,700 - -------------- -------------- Net Expenses 94,971 203,243 -------------- -------------- NET INVESTMENT INCOME (LOSS) (62,844) (189,090) ============== ============== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net Realized gain (loss) on investments 146,493 177,362 Net Unrealized appreciation (depreciation) of investments (152,795) 2,080,181 -------------- -------------- (6,302) 2,257,543 -------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (69,146) $ 2,068,453 ============== ==============
39 STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
GOVERNMENT SECURITIES FUND ----------------------------------- PERIOD ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, 2003 ----------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) $ 67,604 $ 387,356 Net realized gain (loss) on investments (83,669) (855,704) Change in net unrealized appreciation (depreciation) of investments (157,902) (63,143) ----------------------------------- Increase (decrease) in net assets resulting from operations (173,967) (531,491) ----------------------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Class A: Net investment income (19,598) (100,356) Net capital gains - - Class C: Net investment income (32,589) (298,286) Net capital gains - - ----------------------------------- Decrease in net assets resulting from distributions (52,187) (398,642) ----------------------------------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Proceeds from shares sold 291,867 4,113,910 Proceeds from shares purchased by reinvestment of dividends 45,808 366,393 Cost of shares repurchased (3,218,871) (4,085,472) ----------------------------------- Increase (decrease) in net assets derived from capital share transactions (2,881,196) 394,831 ----------------------------------- INCREASE (DECREASE) IN NET ASSETS (3,107,350) (535,302) NET ASSETS Beginning of period 14,447,690 14,982,992 ----------------------------------- End of period $ 11,340,340 $ 14,447,690 =================================== Accumulated undistributed net investment income 18,759 3,342
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 40
INCOME AND EQUITY FUND ----------------------------------- PERIOD ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, 2003 ----------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) $ 56,079 $ 137,423 Net realized gain (loss) on investments 37,329 114,704 Change in net unrealized appreciation (depreciation) of investments (108,240) 108,554 ----------------------------------- Increase (decrease) in net assets resulting from operations (14,832) 360,681 ----------------------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Class A: Net investment income (20,301) (44,125) Net capital gains - - Class C: Net investment income (26,187) (104,478) Net capital gains - - ----------------------------------- Decrease in net assets resulting from distributions (46,488) (148,603) ----------------------------------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Proceeds from shares sold 3,426,726 2,266,334 Proceeds from shares purchased by reinvestment of dividends 43,376 138,180 Cost of shares repurchased (522,596) (765,792) ----------------------------------- Increase (decrease) in net assets derived from capital share transactions 2,947,506 1,638,722 ----------------------------------- INCREASE (DECREASE) IN NET ASSETS 2,886,206 1,850,800 NET ASSETS Beginning of period 7,251,431 5,400,631 ----------------------------------- End of period $ 10,137,637 $ 7,251,431 =================================== Accumulated undistributed net investment income 12,719 3,128 BALANCED FUND ----------------------------------- PERIOD ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, 2003 ----------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) $ 118,369 $ 178,633 Net realized gain (loss) on investments 248,394 380,296 Change in net unrealized appreciation (depreciation) of investments (687,060) 3,197,438 ----------------------------------- Increase (decrease) in net assets resulting from operations (320,297) 3,756,367 ----------------------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Class A: Net investment income - (51,441) Net capital gains - (53,467) Class C: Net investment income - (119,471) Net capital gains - (266,940) ----------------------------------- Decrease in net assets resulting from distributions - (491,319) ----------------------------------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Proceeds from shares sold 5,249,695 8,182,699 Proceeds from shares purchased by reinvestment of dividends - 474,828 Cost of shares repurchased (1,095,532) (1,842,436) ----------------------------------- Increase (decrease) in net assets derived from capital share transactions 4,154,163 6,815,091 ----------------------------------- INCREASE (DECREASE) IN NET ASSETS 3,833,866 10,080,139 NET ASSETS Beginning of period 28,092,170 18,012,031 ----------------------------------- End of period $ 31,926,036 $ 28,092,170 =================================== Accumulated undistributed net investment income 126,090 7,721
41
GROWTH FUND ----------------------------------- PERIOD ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, 2003 ----------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) $ (13,094) $ (14,272) Net realized gain (loss) on investments 13,206 12,511 Change in net unrealized appreciation (depreciation) of investments 46,787 205,022 ----------------------------------- Increase (decrease) in net assets resulting from operations 46,899 203,261 ----------------------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Class A: Net investment income - - Net capital gains - - Class C: Net investment income - - Net capital gains - - ----------------------------------- Decrease in net assets resulting from distributions - - ----------------------------------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Proceeds from shares sold 237,703 171,264 Proceeds from shares purchased by reinvestment of dividends - - Cost of shares repurchased (48,966) (108,518) ----------------------------------- Increase (decrease) in net assets derived from capital share transactions 188,707 62,746 ----------------------------------- INCREASE (DECREASE) IN NET ASSETS 235,606 266,007 NET ASSETS Beginning of period 919,926 653,919 ----------------------------------- End of period $ 1,155,532 $ 919,926 =================================== Accumulated undistributed net investment income - -
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 42
MULTI-CAP VALUE FUND ----------------------------------- PERIOD ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, 2003 ----------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) $ (62,844) $ (56,455) Net realized gain (loss) on investments 146,493 104,871 Change in net unrealized appreciation (depreciation) of investments (152,795) 929,030 ----------------------------------- Increase (decrease) in net assets resulting from operations (69,146) 977,446 ----------------------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Class A: Net investment income - - Net capital gains - - Class C: Net investment income - - Net capital gains - - ----------------------------------- Decrease in net assets resulting from distributions - - ----------------------------------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Proceeds from shares sold 2,302,891 2,206,742 Proceeds from shares purchased by reinvestment of dividends - - Cost of shares repurchased (110,507) (216,637) ----------------------------------- Increase (decrease) in net assets derived from capital share transactions 2,192,384 1,990,105 ----------------------------------- INCREASE (DECREASE) IN NET ASSETS 2,123,238 2,967,551 NET ASSETS Beginning of period 4,717,243 1,749,692 ----------------------------------- End of period $ 6,840,481 $ 4,717,243 =================================== Accumulated undistributed net investment income - - SMALL CAP FUND ----------------------------------- PERIOD ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, 2003 ----------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) $ (189,090) $ (275,223) Net realized gain (loss) on investments 177,362 218,847 Change in net unrealized appreciation (depreciation) of investments 2,080,181 4,336,572 ----------------------------------- Increase (decrease) in net assets resulting from operations 2,068,453 4,280,196 ----------------------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Class A: Net investment income - - Net capital gains - (63,642) Class C: Net investment income - - Net capital gains - (9,702) ----------------------------------- Decrease in net assets resulting from distributions - (73,344) ----------------------------------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Proceeds from shares sold 4,635,073 1,940,306 Proceeds from shares purchased by reinvestment of dividends - 58,553 Cost of shares repurchased (1,342,018) (1,276,670) ----------------------------------- Increase (decrease) in net assets derived from capital share transactions 3,293,055 722,189 ----------------------------------- INCREASE (DECREASE) IN NET ASSETS 5,361,508 4,929,041 NET ASSETS Beginning of period 10,235,655 5,306,614 ----------------------------------- End of period $ 15,597,163 $ 10,235,655 =================================== Accumulated undistributed net investment income - -
43 PACIFIC ADVISORS FUND INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) June 30, 2004 NOTE 1. ORGANIZATION Pacific Advisors Fund Inc. (the "Company") is an open-end diviersified investment management company registered under the Investment Company Act of 1940, as amended. The Company currently offers six Fund: Government Securities Fund, Income and Equity Fund, Balanced Fund, Growth Fund, Multi-Cap Value Fund and Small Cap Fund. Each Fund is a separate investment portfolio of the Company with a distinct investment objective, investment program, policies and restrictions. The Government Securities Fund seeks to provide high current income, preservation of capital, and rising future income, consistent with prudent investment risk. The Income and Equity Fund seeks to provide current income and, secondarily, long-term capital appreciation. The Balanced Fund seeks to achieve long-term capital appreciation and income consistent with reduced market risk. The Growth Fund seeks to achieve long-term capital appreciation through investment in medium to large capitalization companies. The Multi-Cap Value Fund seeks long-term capital appreciation by investing in a diversified portfolio of large to small capitalization companies. The Small Cap Fund seeks to provide capital appreciation through investment in small capitalization companies. Effective April 1, 1998, the Funds offer Class A and Class C shares, each of which has equal rights as to assets and voting privileges except that Class A and Class C each has exclusive voting rights with respect to its distribution plan. Investment income, realized and unrealized capital gains and losses, and the common expenses of each Fund are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each Class of shares differes in its respective service and distribution expenses and may differ in its transfer agent, registration, and certain other class-specific fees and expenses. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES A. SECURITY VALUATION. Securities listed on a national securities exchange and certain over-the counter ("OTC") issues traded on the NASDAQ national market system are valued at the last quoted sale price at the close of the New York Stock Exchange. OTC issues not quoted on the NASDAQ system and other equity securities for which no sale price is available, are valued at the last bid price as obtained from published sources (including Quotron), where available, and otherwise from brokers who are market makers for such securities. Debt securities with a maturity of less than 60 days are valued on an amortized cost basis. Premium or discount on debt securities are amortized. B. SECURITY TRANSACTIONS AND INVESTMENT INCOME. Security transactions are accounted for on the trade date. The cost of investments sold is determined by use of the specific identification method for both financial reporting and Federal Income tax purposes. Dividends are recorded on the ex-dividend date. Interest income is recorded on an accrual basis. C. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. The Government Securities Fund and Income and Equity Fund declare and distribute dividends of their net investment income, if any, quarterly. The Balanced Fund, Growth Fund, Multi-Cap Value Fund and Small Cap Fund declare and distribute dividends of their net investment income, if any, annually. The Board of Directors will determine the amount and timing of such payments. Income dividends and capital gains distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments of income and gain on various investment securities held by the Funds, timing differences and differing characterization of distributions made by the Fund. E. 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 reported amountsin the financial statements and footnotes. Actual results could differ from those estimates. NOTE 3. INVESTMENT MANAGEMENT, DISTRIBUTOR AND OTHER RELATED PARTY TRANSACTIONS The Company and the Funds have entered into investment management agreements ("Management Agreements") with Pacific Global Investment Management Company, Inc. ("Investment Manager"). The Management Agreements provide for investment management fees, payable monthly, and calculated at the maximum annual rate of 0.65% of average net assets for the Government Securities Fund, 0.75% of average net assets for the Income and Equity, Balanced, Growth and Small Cap Funds and 1.00% of average net assets for the Multi-Cap Value Fund. The Investment Manager has entered into a sub-advisory agreement ("Sub-Advisory Agreement") with Bache Capital Management ("Advisor") for the Balanced Fund. It has also entered into a co-management agreement ("Co-management Agreement") with Bache Capital Management ("Advisor") for the Income and Equity Fund. The Investment Manager is solely responsible for the payment of these fees to the Advisors. In accordance with Expense Limitation agreements with the Company, the Investment Manager is required to waive fees and/or reimburse expenses in amounts necessary to keep the total Fund operating expenses of certain Funds (as a percentage of average net assets) at or below the percentages shown below:
BEFORE 02/15/04 CLASS A CLASS C Government Securities Fund 1.65% 2.40% Income and Equity Fund 1.85% 2.60% Growth Fund 2.50% 3.25% Multi-Cap Value Fund 2.50% 3.25% AFTER 02/15/04 CLASS A CLASS C Government Securities Fund 1.75% 2.50% Income and Equity Fund 1.95% 2.70% Growth Fund 2.65% 3.40% Multi-Cap Value Fund 2.65% 3.40%
These agreements may be terminated by either party. In addition, from time to time, the Investment Manager and Advisors may voluntarily waive their management and sub-advisory fees, and/or absorb certain expenses for the Funds. Pursuant to the Expense Limitation Agreements, providing for the voluntary waiver of fees and the assumption of 44 expenses by the Investment Manager, and, with respect to the Income and Equity Fund, the Co-Manager, the following amounts were waived or reimbursed for the period ended June 30, 2004.
MANAGEMENT EXPENSE FEES WAIVED REIMBURSEMENTS Government Securities Fund $ 35,386 $ - Income and Equity Fund 30,663 - Growth Fund 3,906 743 Multi-Cap Value Fund 14,700 -
The Investment Manager and the Co-Manager terminated all of their rights under the expense limitation agreements with respect to potential recoupment from the Funds of all management fess previously waived and all expenses previously reimbursed. In the future, the Investment Manager and Co-Manager will not have any rights to recover fees they may waive or expenses they may reimburse, with respect to any of the Funds. For the period ended June 30, 2004, Pacific Global Fund Distributors, Inc. ("PGFD"), the principal underwriter for the Company, received commissions on sales of capital stock, after deducting amounts allowed to authorized distributors as commissions. The amounts are as follows:
UNDERWRITING FEES COMMISSIONS RETAINED PAID Government Securities Fund $ 201 $ 1,121 Income and Equity Fund 1,435 7,254 Balanced Fund 3,017 14,464 Growth Fund 858 4,290 Multi-Cap Value Fund 1,974 9,697 Small Cap Fund 7,026 35,129
PGFD is a wholly-owned subsidiary of the Investment Manager. The Company and the Funds have entered into agreements with Pacific Global Investor Services, Inc. ("PGIS") to provide fund accounting services at the monthly fee of three basis points for the first one hundred million in net assets or a minimum of $1,250. In addition, agreements to provide transfer agent services has also been entered into at a rate of $18.00 per year per open account and $3.00 per year per closed account with minimum charges of $1,250 per month for A and C share accounts. PGIS is a wholly-owned subsidiary of the Investment Manager. Accounts payable to related parties consists of management fees payable to the Investment Manager and fund accounting and transfer agent fees payable to PGIS. The Company has adopted a plan of distribution, whereby the Funds may pay a service fee to qualified recipients in an amount up to 0.25% and 1.00% per annum of each Fund's daily net assets for A shares and C shares, respectively. For the period ended June 30, 2004, total service fees were:
CLASS A CLASS C Government Securities Fund $ 3,582 $ 48,610 Income and Equity Fund 3,066 32,248 Balanced Fund 5,279 125,762 Growth Fund 974 1,310 Multi-Cap Value Fund 1,417 20,086 Small Cap Fund 12,580 9,067
NOTE 4. PURCHASE AND SALES OF SECURITIES The following summarizes purchases and sales of investment securities, other than short-term investments, and aggregate gross unrealized appreciation and depreciation and cost of securities by each Fund for the period ended and as of June 30, 2004.
AS OF JUNE 30, 2004 PERIOD ENDED JUNE 30, 2004 GROSS GROSS NET UNREALIZED COST OF PROCEEDS UNREALIZED UNREALIZED APPRECIATION PURCHASES FROM SALES APPRECIATION DEPRECIATION (DEPRECIATION) Government Securities Fund $ 15,601,110 $ 18,480,404 $ 25,451 $ 46,129 $ (20,678) Income and Equity Fund 4,574,728 1,161,759 226,788 211,073 15,715 Balanced Fund 10,973,787 6,197,682 4,248,434 216,113 4,032,321 Growth Fund 153,797 62,295 218,292 93,441 124,851 Multi-Cap Value Fund 3,302,679 831,257 806,900 168,232 638,668 Small Cap Fund 4,413,496 570,078 6,481,061 340,783 6,140,278
45 NOTE 5. CAPITAL SHARE TRANSACTIONS Effective December 15, 2001, the Growth Fund and the Small Cap Fund instituted a short-term redemption fee. Shares of these Funds purchased after December 15, 2001 that are sold or exchanged within 90 days of the purchase are assessed a redemption fee of 2% of the value of the shares sold or exchanged. The redemption fees collected through June 30, 2004, are included as a reduction to the shares repurchased in the table below. The amount of the reduction is as follows: Small Cap Fund Class A $ 3,544
PERIOD ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, 2003 ---------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT ---------------------------- ---------------------------- GOVERNMENT SECURITIES FUND CLASS A Shares Sold 4,683 $ 45,182 11,268 $ 116,219 Reinvestment of Distributions 1,429 13,674 7,106 70,704 ---------------------------- ---------------------------- 6,112 58,856 18,374 186,923 Shares Repurchased (40,621) (389,937) (110,329) (1,105,771) ---------------------------- ---------------------------- Net Increase (decrease) (34,509) $ (331,081) (91,955) $ (918,848) ============================ ============================ CLASS C Shares Sold 26,398 $ 246,685 403,006 $ 3,997,691 Reinvestment of Distributions 3,461 32,134 30,489 295,689 ---------------------------- ---------------------------- 29,859 278,819 433,495 4,293,380 Shares Repurchased (300,523) (2,828,934) (314,266) (2,979,701) ---------------------------- ---------------------------- Net Increase (270,664) $ (2,550,115) 119,229 $ 1,313,679 ============================ ============================ PERIOD ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, 2003 ---------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT ---------------------------- ---------------------------- INCOME AND EQUITY FUND CLASS A Shares Sold 149,263 $ 1,559,003 13,196 $ 133,330 Reinvestment of Distributions 1,734 17,924 3,629 36,033 ---------------------------- ---------------------------- 150,997 1,576,927 16,825 169,363 Shares Repurchased (31,536) (326,617) (52,707) (528,613) ---------------------------- ---------------------------- Net Increase (decrease) 119,461 $ 1,250,310 (35,882) $ (359,250) ============================ ============================ CLASS C Shares Sold 187,724 $ 1,867,723 218,819 $ 2,133,004 Reinvestment of Distributions 2,566 25,452 10,541 102,147 ---------------------------- ---------------------------- 190,290 1,893,175 229,360 2,235,151 Shares Repurchased (19,787) (195,979) (24,427) (237,179) ---------------------------- ---------------------------- Net Increase 170,503 $ 1,697,196 204,933 $ 1,997,972 ============================ ============================
46
PERIOD ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, 2003 ---------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT ---------------------------- ---------------------------- BALANCED FUND CLASS A Shares Sold 63,862 $ 1,011,508 56,665 $ 833,411 Reinvestment of Distributions - - 5,945 93,877 ---------------------------- ---------------------------- 63,862 1,011,508 62,610 927,288 Shares Repurchased (17,671) (280,398) (54,670) (795,169) ---------------------------- ---------------------------- Net Decrease 46,191 $ 731,110 7,940 $ 132,119 ============================ ============================ CLASS C Shares Sold 274,353 $ 4,238,187 509,081 $ 7,349,288 Reinvestment of Distributions - - 24,737 380,951 ---------------------------- ---------------------------- 274,353 4,238,187 533,818 7,730,239 Shares Repurchased (52,920) (815,134) (73,497) (1,047,267) ---------------------------- ---------------------------- Net Increase 221,433 $ 3,423,053 460,321 $ 6,682,972 ============================ ============================ PERIOD ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, 2003 ---------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT ---------------------------- ---------------------------- GROWTH FUND CLASS A Shares Sold 27,886 $ 212,390 21,675 $ 136,077 Reinvestment of Distributions - - - - ---------------------------- ---------------------------- 27,886 212,390 21,675 136,077 Shares Repurchased (4,987) (38,121) (12,617) (82,009) ---------------------------- ---------------------------- Net Increase (decrease) 22,899 $ 174,269 9,058 $ 54,068 ============================ ============================ CLASS C Shares Sold 3,506 $ 25,313 5,680 $ 35,187 Reinvestment of Distributions - - - - ---------------------------- ---------------------------- 3,506 25,313 5,680 35,187 Shares Repurchased (1,556) (10,875) (4,567) (26,509) ---------------------------- ---------------------------- Net Decrease 1,950 $ 14,438 1,113 $ 8,678 ============================ ============================
47
PERIOD ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, 2003 ---------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT ---------------------------- ---------------------------- MULTI-CAP VALUE FUND CLASS A Shares Sold 64,192 $ 743,563 56,817 $ 567,721 Reinvestment of Distributions - - - - ---------------------------- ---------------------------- 64,192 743,563 56,817 567,721 Shares Repurchased (3,644) (42,784) (17,022) (162,229) ---------------------------- ---------------------------- Net Increase 60,548 $ 700,779 39,795 $ 405,492 ============================ ============================ CLASS C Shares Sold 135,896 $ 1,559,328 160,357 $ 1,639,021 Reinvestment of Distributions - - - - ---------------------------- ---------------------------- 135,896 1,559,328 160,357 1,639,021 Shares Repurchased (5,809) (67,723) (5,757) (54,408) ---------------------------- ---------------------------- Net Increase 130,087 $ 1,491,605 154,600 $ 1,584,613 ============================ ============================ PERIOD ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, 2003 ---------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT ---------------------------- ---------------------------- SMALL CAP FUND CLASS A Shares Sold 177,841 $ 3,784,276 94,743 $ 1,483,067 Reinvestment of Distributions - - 2,703 49,619 ---------------------------- ---------------------------- 177,841 3,784,276 97,446 1,532,686 Shares Repurchased (55,979) (1,154,965) (81,663) (1,091,377) ---------------------------- ---------------------------- Net Increase (decrease) 121,862 $ 2,629,311 15,783 $ 441,309 ============================ ============================ CLASS C Shares Sold 45,279 $ 850,797 30,274 $ 457,239 Reinvestment of Distributions - - 524 8,934 ---------------------------- ---------------------------- 45,279 850,797 30,798 466,173 Shares Repurchased (10,022) (190,596) (13,899) (187,910) ---------------------------- ---------------------------- Net Increase (decrease) 35,257 $ 660,201 16,899 $ 278,263 ============================ ============================
48 PACIFIC ADVISORS FUND INC. FINANCIAL HIGHLIGHTS (UNAUDITED) (For a share outstanding throughout the period)
GOVERNMENT SECURITIES FUND ------------------------------------------------------------------------- CLASS A ------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------ JUNE 30, 2004 2003 2002 2001 2000 ------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 9.68 $ 10.20 $ 10.15 $ 10.88 $ 9.74 ------------------ --------- --------- --------- --------- Income from investing operations Net investment income 0.11 0.35 0.31 0.31 0.35 Net realized and unrealized gains (losses) on securities (0.22) (0.57) (0.04) (0.37) 1.41 ------------------ --------- --------- --------- --------- Total from investment operations (0.11) (0.22) 0.27 (0.06) 1.76 ------------------ --------- --------- --------- --------- Less distributions From net investment income (0.07) (0.30) (0.21) (0.29) (0.34) From net capital gains - - (0.01) (0.38) (0.28) ------------------ --------- --------- --------- --------- Total distributions (0.07) (0.30) (0.22) (0.67) (0.62) ------------------ --------- --------- --------- --------- Net asset value, end of period $ 9.50 $ 9.68 $ 10.20 $ 10.15 $ 10.88 ================== ========= ========= ========= ========= TOTAL INVESTMENT RETURN (a) (1.16)%(b) (2.20)% 2.78% (0.49)% 18.42% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 2,640 $ 3,025 $ 4,125 $ 6,487 $ 6,071 Ratio of net investment income to average net assets With expense reductions 1.68%(c) 2.88% 2.57% 3.01% 3.46% Without expense reductions 1.11%(c) 2.33% 1.42% 2.22% 2.08% Ratio of expenses to average net assets With expense reductions 1.74%(c) 1.65% 1.65% 1.65% 1.65% Without expense reductions 2.31%(c) 2.20% 2.80% 2.43% 3.03% Fund portfolio turnover rate 368.32%(c) 206.55% 212.10% 75.81% 22.21% CLASS C ------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------ JUNE 30, 2004 2003 2002 2001 2000 ------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 9.43 $ 9.95 $ 9.96 $ 10.74 $ 9.63 ------------------ --------- --------- --------- --------- Income from investing operations Net investment income 0.03 0.21 0.23 0.25 0.29 Net realized and unrealized gains (losses) on securities (0.18) (0.50) (0.04) (0.38) 1.38 ------------------ --------- --------- --------- --------- Total from investment operations (0.15) (0.29) 0.19 (0.13) 1.67 ------------------ --------- --------- --------- --------- Less distributions From net investment income (0.03) (0.23) (0.19) (0.27) (0.28) From net capital gains - - (0.01) (0.38) (0.28) ------------------ --------- --------- --------- --------- Total distributions (0.03) (0.23) (0.20) (0.65) (0.56) ------------------ --------- --------- --------- --------- Net asset value, end of period $ 9.25 $ 9.43 $ 9.95 $ 9.96 $ 10.74 ================== ========= ========= ========= ========= TOTAL INVESTMENT RETURN (1.55)%(b) (2.98)% 1.98% (1.21)% 17.57% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 8,700 $ 11,423 $ 10,858 $ 4,172 $ 2,682 Ratio of net investment income to average net assets With expense reductions 0.90%(c) 2.23% 1.90% 2.25% 2.79% Without expense reductions 0.34%(c) 1.67% 0.81% 1.28% 1.23% Ratio of expenses to average net assets With expense reductions 2.49%(c) 2.39% 2.40% 2.40% 2.36% Without expense reductions 3.05%(c) 2.95% 3.49% 3.37% 3.92%
(a) The Fund's maximum sales charge is not included in the total return computation (b) Not Annualized (c) Annualized SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 49
INCOME AND EQUITY FUND ------------------------------------------------------------------------- CLASS A ------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------ JUNE 30, 2004 2003 2002 2001 2000 ------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 10.33 $ 9.91 $ 10.31 $ 10.43 $ 10.39 ------------------ --------- --------- --------- --------- Income from investing operations Net investment Income (0.03) 0.33 0.39 0.42 0.52 Net realized and unrealized gains (losses) on securities 0.07 0.31 (0.49) (0.14) 0.07 ------------------ --------- --------- --------- --------- Total from investment operations 0.04 0.64 (0.10) 0.28 0.59 ------------------ --------- --------- --------- --------- Less distributions From net investment income (0.08) (0.22) (0.30) (0.40) (0.55) From net capital gains - - - - - ------------------ --------- --------- --------- --------- Total distributions (0.08) (0.22) (0.30) (0.40) (0.55) ------------------ --------- --------- --------- --------- Net asset value, end of period $ 10.29 $ 10.33 $ 9.91 $ 10.31 $ 10.43 ================== ========= ========= ========= ========= TOTAL INVESTMENT RETURN (a) 0.33%(b) 6.63% (0.92)% 2.63% 6.03% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 3,058 $ 1,835 $ 2,117 $ 2,708 $ 2,217 Ratio of net investment income to average net assets With expense reductions 1.84%(c) 2.92% 3.43% 4.28% 4.67% Without expense reductions 1.14%(c) 1.84% 1.75% 2.66% 2.76% Ratio of expenses to average net assets With expense reductions 1.94%(c) 1.85% 1.85% 1.85% 1.83% Without expense reductions 2.64%(c) 2.94% 3.53% 3.47% 3.75% Fund portfolio turnover rate 30.68%(c) 71.02% 91.50% 43.38% 21.83% CLASS C ------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------ JUNE 30, 2004 2003 2002 2001 2000 ------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 9.90 $ 9.60 $ 10.03 $ 10.26 $ 10.15 ------------------ --------- --------- --------- --------- Income from investing operations Net investment Income 0.07 0.24 0.34 0.42 0.35 Net realized and unrealized gains (losses) on securities (0.06) 0.32 (0.51) (0.22) 0.10 ------------------ --------- --------- --------- --------- Total from investment operations 0.01 0.56 (0.17) 0.20 0.45 ------------------ --------- --------- --------- --------- Less distributions From net investment income (0.04) (0.26) (0.26) (0.43) (0.34) From net capital gains - - - - - ------------------ --------- --------- --------- --------- Total distributions (0.04) (0.26) (0.26) (0.43) (0.34) ------------------ --------- --------- --------- --------- Net asset value, end of period $ 9.87 $ 9.90 $ 9.60 $ 10.03 $ 10.26 ================== ========= ========= ========= ========= TOTAL INVESTMENT RETURN 0.08%(b) 5.88% (1.60)% 1.81% 4.32% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 7,079 $ 5,416 $ 3,284 $ 1,365 $ 815 Ratio of net investment income to average net assets With expense reductions 1.04%(c) 2.10% 2.95% 3.58% 3.90% Without expense reductions 0.35%(c) 1.03% 1.15% 1.65% 1.88% Ratio of expenses to average net assets With expense reductions 2.69%(c) 2.60% 2.60% 2.60% 2.55% Without expense reductions 3.38%(c) 3.67% 4.39% 4.54% 4.57%
(a) The Fund's maximum sales charge is not included in the total return computation (b) Not Annualized (c) Annualized SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 50
BALANCED FUND ------------------------------------------------------------------------- CLASS A ------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------ JUNE 30, 2004 2003 2002 2001 2000 ------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 15.88 $ 13.69 $ 14.42 $ 15.22 $ 14.04 ------------------ --------- --------- --------- --------- Income from investing operations Net investment income 0.08 0.21 0.06 0.10 0.21 Net realized and unrealized gains (losses) on securities (0.19) 2.34 (0.79) (0.81) 1.19 ------------------ --------- --------- --------- --------- Total from investment operations (0.11) 2.55 (0.73) (0.71) 1.40 ------------------ --------- --------- --------- --------- Less distributions From net investment income - (0.18) - (0.09) (0.15) From net capital gains - (0.18) - - (0.07) ------------------ --------- --------- --------- --------- Total distributions - (0.36) - (0.09) (0.22) ------------------ --------- --------- --------- --------- Net asset value, end of period $ 15.77 $ 15.88 $ 13.69 $ 14.42 $ 15.22 ================== ========= ========= ========= ========= TOTAL INVESTMENT RETURN (a) (0.69)%(b) 18.63% (5.05)% (4.69)% 9.99% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 5,435 $ 4,739 $ 3,977 $ 5,013 $ 5,942 Ratio of net investment income to average net assets With expense reductions 1.45%(c) 1.44% 0.30% 0.55% 1.15% Without expense reductions 1.45%(c) 1.44% 0.30% 0.55% 0.74% Ratio of expenses to average net assets With expense reductions 2.40%(c) 2.86% 3.47% 3.22% 2.88% Without expense reductions 2.40%(c) 2.86% 3.47% 3.22% 3.28% Fund portfolio turnover rate 46.10%(c) 58.73% 57.74% 42.20% 43.30% CLASS C ------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------ JUNE 30, 2004 2003 2002 2001 2000 ------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 15.49 $ 13.40 $ 14.18 $ 14.99 $ 13.91 ------------------ --------- --------- --------- --------- Income from investing operations Net investment income 0.05 0.09 0.01 0.01 0.07 Net realized and unrealized gains (losses) on securities (0.22) 2.26 (0.79) (0.80) 1.17 ------------------ --------- --------- --------- --------- Total from investment operations (0.17) 2.35 (0.78) (0.79) 1.24 ------------------ --------- --------- --------- --------- Less distributions From net investment income - (0.08) - (0.02) (0.09) From net capital gains - (0.18) - - (0.07) ------------------ --------- --------- --------- --------- Total distributions - (0.26) - (0.02) (0.16) ------------------ --------- --------- --------- --------- Net asset value, end of period $ 15.32 $ 15.49 $ 13.40 $ 14.18 $ 14.99 ================== ========= ========= ========= ========= TOTAL INVESTMENT RETURN (1.10)%(b) 17.58% (5.49)% (5.25)% 8.92% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 26,492 $ 23,353 $ 14,035 $ 7,404 $ 4,559 Ratio of net investment income to average net assets With expense reductions 0.65%(c) 0.67% (0.16)% (0.08)% 0.39% Without expense reductions 0.65%(c) 0.67% (0.16)% (0.08)% (0.01)% Ratio of expenses to average net assets With expense reductions 3.19%(c) 3.66% 4.15% 3.99% 3.63% Without expense reductions 3.19%(c) 3.66% 4.15% 3.99% 4.03%
(a) The Fund's maximum sales charge is not included in the total return computation (b) Not Annualized (c) Annualized SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 51
GROWTH FUND ------------------------------------------------------------------------- CLASS A ------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------ JUNE 30, 2004 2003 2002 2001 2000 ------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 7.14 $ 5.48 $ 7.04 $ 9.83 $ 11.67 ------------------ --------- --------- --------- --------- Income from investing operations Net investment expense (0.01) (0.07) (0.12) (0.11) (0.01) Net realized and unrealized gains (losses) on securities 0.40 1.73 (1.44) (2.68) (1.83) ------------------ --------- --------- --------- --------- Total from investment operations 0.39 1.66 (1.56) (2.79) (1.84) ------------------ --------- --------- --------- --------- Less distributions From net investment income - - - - - From net capital gains - - - - - ------------------ --------- --------- --------- --------- Total distributions - - - - - ------------------ --------- --------- --------- --------- Net asset value, end of period $ 7.53 $ 7.14 $ 5.48 $ 7.04 $ 9.83 ================== ========= ========= ========= ========= TOTAL INVESTMENT RETURN (a) 5.46%(b) 30.29% (22.16)% (28.38)% (15.77)% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 878 $ 669 $ 464 $ 588 $ 825 Ratio of net investment income to average net assets With expense reductions (2.31)%(c) (1.69)% (1.97)% (1.26)% (0.24)% Without expense reductions (6.36)%(c) (7.44)% (8.25)% (5.44)% (3.98)% Ratio of expenses to average net assets With expense reductions 2.95%(c) 2.48% 2.50% 2.44% 2.50% Without expense reductions 7.00%(c) 8.23% 8.77% 6.62% 6.23% Fund portfolio turnover rate 12.62%(c) 34.58% 78.06% 57.61% 16.00% CLASS C ------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------ JUNE 30, 2004 2003 2002 2001 2000 ------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 6.83 $ 5.33 $ 6.89 $ 9.70 $ 11.61 ------------------ --------- --------- --------- --------- Income from investing operations Net investment expense (0.06) (0.16) (0.44) (0.22) (0.06) Net realized and unrealized gains (losses) on securities 0.40 1.66 (1.12) (2.59) (1.85) ------------------ --------- --------- --------- --------- Total from investment operations 0.34 1.50 (1.56) (2.81) (1.91) ------------------ --------- --------- --------- --------- Less distributions From net investment income - - - - - From net capital gains - - - - - ------------------ --------- --------- --------- --------- Total distributions - - - - - ------------------ --------- --------- --------- --------- Net asset value, end of period $ 7.17 $ 6.83 $ 5.33 $ 6.89 $ 9.70 ================== ========= ========= ========= ========= TOTAL INVESTMENT RETURN 4.98%(b) 28.14% (22.64)% (28.97)% (16.45)% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 277 $ 251 $ 190 $ 439 $ 728 Ratio of net investment income to average net assets With expense reductions (3.10)%(c) (2.47)% (2.75)% (2.04)% (0.97)% Without expense reductions (7.18)%(c) (8.18)% (8.67)% (5.59)% (4.04)% Ratio of expenses to average net assets With expense reductions 3.74%(c) 3.25% 3.25% 3.23% 3.25% Without expense reductions 7.82%(c) 8.96% 9.17% 6.77% 6.32%
(a) The Fund's maximum sales charge is not included in the total return computation (b) Not Annualized (c) Annualized SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 52
MULTI-CAP VALUE FUND ----------------------------------------------------------------- CLASS A ----------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR APRIL 1, 2002(a) ENDED ENDED TO JUNE 30, 2004 DECEMBER 31, 2003 DECEMBER 31, 2002 ----------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 11.46 $ 7.95 $ 10.00 ------------------ ----------------- ----------------- Income from investing operations Net investment expense (0.01) (0.09) (0.07) Net realized and unrealized gains (losses) on securities (0.04) 3.60 (1.98) ------------------ ----------------- ----------------- Total from investment operations (0.05) 3.51 (2.05) ------------------ ----------------- ----------------- Less distributions From net investment income - - - From net capital gains - - - ------------------ ----------------- ----------------- Total distributions - - - ------------------ ----------------- ----------------- Net asset value, end of period $ 11.41 $ 11.46 $ 7.95 ================== ================= ================= TOTAL INVESTMENT RETURN (b) (0.44)%(c) 44.15% (20.50)%(c) RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 1,866 $ 1,180 $ 503 Ratio of net investment income to average net assets With expense reductions (1.50)%(d) (1.67)% (1.44)%(d) Without expense reductions (2.00)%(d) (3.14)% (5.65)%(d) Ratio of expenses to average net assets With expense reductions 2.59%(d) 2.49% 2.49%(d) Without expense reductions 3.08%(d) 3.96% 6.69%(d) Fund portfolio turnover rate 29.76%(d) 20.16% 8.23%(d) CLASS C ----------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR APRIL 1, 2002(a) ENDED ENDED TO JUNE 30, 2004 DECEMBER 31, 2003 DECEMBER 31, 2002 ----------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 11.33 $ 7.91 $ 10.00 ------------------ ----------------- ----------------- Income from investing operations Net investment expense (0.06) 0.32 (0.52) Net realized and unrealized gains (losses) on securities (0.03) 3.10 (1.57) ------------------ ----------------- ----------------- Total from investment operations (0.09) 3.42 (2.09) ------------------ ----------------- ----------------- Less distributions From net investment income - - - From net capital gains - - - ------------------ ----------------- ----------------- Total distributions - - - ------------------ ----------------- ----------------- Net asset value, end of period $ 11.24 $ 11.33 $ 7.91 ================== ================= ================= TOTAL INVESTMENT RETURN (b) (0.79)%(c) 43.24% (20.90)%(c) RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 4,975 $ 3,537 $ 1,247 Ratio of net investment income to average net assets With expense reductions (2.32)%(d) (2.41)% (2.20)%(d) Without expense reductions (2.81)%(d) (3.90)% (6.08)%(d) Ratio of expenses to average net assets With expense reductions 3.39%(d) 3.24% 3.23%(d) Without expense reductions 3.89%(d) 4.74% 7.11%(d)
(a) Commencement of operations (b) The Fund's maximum sales charge is not included in the total return computation (c) Not Annualized (d) Annualized SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 53
SMALL CAP FUND ------------------------------------------------------------------------- CLASS A ------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------ JUNE 30, 2004 2003 2002 2001 2000 ------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 18.77 $ 10.32 $ 15.23 $ 13.42 $ 11.98 ------------------ --------- --------- --------- --------- Income from investing operations Net investment expense 0.62 (0.37) (0.85) (0.42) (0.79) Net realized and unrealized gains (losses) on securities 2.90 8.95 (4.05) 3.11 2.32 ------------------ --------- --------- --------- --------- Total from investment operations 3.52 8.58 (4.90) 2.69 1.53 ------------------ --------- --------- --------- --------- Less distributions From net investment income - - - - - From net capital gains - (0.13) (0.01) (0.88) (0.09) ------------------ --------- --------- --------- --------- Total distributions - (0.13) (0.01) (0.88) (0.09) ------------------ --------- --------- --------- --------- Net asset value, end of period $ 22.29 $ 18.77 $ 10.32 $ 15.23 $ 13.42 ================== ========= ========= ========= ========= TOTAL INVESTMENT RETURN (a) 18.75%(b) 83.21% (32.20)% 20.23% 12.83% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 13,363 $ 8,961 $ 4,763 $ 7,715 $ 6,541 Ratio of net investment income to average net assets With expense reductions (2.96)%(c) (4.06)% (4.01)% (3.44)% (3.20)% Without expense reductions (2.96)%(c) (4.06)% (4.01)% (3.44)% (3.20)% Ratio of expenses to average net assets With expense reductions 3.19%(c) 4.44% 4.52% 3.74% 3.58% Without expense reductions 3.19%(c) 4.44% 4.52% 3.74% 3.58% Fund portfolio turnover rate 9.08%(c) 39.95% 23.39% 43.89% 44.82% CLASS C ------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------ JUNE 30, 2004 2003 2002 2001 2000 ------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 17.41 $ 9.65 $ 14.47 $ 13.04 $ 11.93 ------------------ --------- --------- --------- --------- Income from investing operations Net investment expense 0.39 0.04 (0.88) (0.08) (0.78) Net realized and unrealized gains (losses) on securities 2.81 7.85 (3.93) 2.39 1.98 ------------------ --------- --------- --------- --------- Total from investment operations 3.20 7.89 (4.81) 2.31 1.20 ------------------ --------- --------- --------- --------- Less distributions From net investment income - - - - - From net capital gains - (0.13) (0.01) (0.88) (0.09) ------------------ --------- --------- --------- --------- Total distributions - (0.13) (0.01) (0.88) (0.09) ------------------ --------- --------- --------- --------- Net asset value, end of period $ 20.61 $ 17.41 $ 9.65 $ 14.47 $ 13.04 ================== ========= ========= ========= ========= TOTAL INVESTMENT RETURN 18.38%(b) 81.83% -33.27% 17.91% 10.11% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 2,234 $ 1,274 $ 543 $ 886 $ 454 Ratio of net investment income to average net assets With expense reductions (3.72)%(c) (4.88)% (5.47)% (5.48)% (5.52)% Without expense reductions (3.72)%(c) (4.88)% (5.47)% (5.48)% (5.52)% Ratio of expenses to average net assets With expense reductions 3.95%(c) 5.26% 5.97% 5.78% 5.90% Without expense reductions 3.95%(c) 5.26% 5.97% 5.78% 5.90%
(a) The Fund's maximum sales charge is not included in the total return computation (b) Not Annualized (c) Annualized SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 54 PACIFIC ADVISORS FUND INC. DIRECTORS AND OFFICERS
NUMBER OF PORTFOLIOS IN POSITIONS(S) TERM OF OFFICES PRINCIPAL OCCUPATIONS FUND COMPLEX HELD WITH THE AND LENGTH OF DURING OVERSEEN BY OTHER DIRECTORSHIPS NAME, ADDRESS AND AGE COMPANY TIME SERVED PAST 5 YEARS TRUSTEE HELD BY TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ Thomas M. Brinker (70) Director Since 1992 2003 - Present: Retired 6 Pacific Advisors None 1 North Ormond Avenue Mutual Funds Havertown, PA 19083 1970 - 2003: President Fringe Benefits, Inc/ Financial Foresight, Ltd., d/b/a The Brinker Organization (Financial Services Companies) Victoria Breen (53) Director and Since 1992 1992 - Present: Assistant 6 Pacific Advisors None 603 West Ojai Avenue Assistant Secretary and Director, Mutual Funds Ojai, CA 93023 Secretary Pacific Global Investment Management Company, Pacific Global Investor Services, Inc. 1994 - Present: General Agent, Transamerica Life Companies and Registered Principal, Transamerica Financial Resources, Inc. 1986 - Present: Branch Manager, Derby & Derby Inc. (Financial Services Company) Thomas H. Hanson (54) Vice President Since 1992 1992 - Present: Executive 6 Pacific Advisors None 206 North Jackson Street and Secretary Vice President and Mutual Funds Suite 301 Director, Pacific Global Glendale, CA 91206 Investment Management Company; President and Director, Pacific Global Fund Distributors, Inc.; President and Director, Pacific Global Investor Services, Inc. 1997 - 2001: Vice President and Director, Pacific Global Investment Fund Ltd. 1993 - Present: Owner, Director, Chairman, President and CEO of TriVest Capital Management, Inc.
55
NUMBER OF PORTFOLIOS IN POSITIONS(S) TERM OF OFFICES PRINCIPAL OCCUPATIONS FUND COMPLEX HELD WITH THE AND LENGTH OF DURING OVERSEEN BY OTHER DIRECTORSHIPS NAME, ADDRESS AND AGE COMPANY TIME SERVED PAST 5 YEARS TRUSTEE HELD BY TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ Catherine L. Henning (26) Assistant Since 2002 2004 - Present: Secretary, 6 Pacific Advisors None 206 North Jackson Street Secretary Pacific Global Investment Mutual Funds Suite 301 Management Company Glendale, CA 91206 2002 - 2004: Assistant Secretary, Pacific Global Investment Management Company 2002 - Present: Assistant Secretary, Pacific Global Pacific Global Fund Distributors, Inc. and Pacific Global Investor Services, Inc. 1999 - Present: Marketing Coordinator, Pacific Global Investment Management Company George A. Henning (57) President and Since 1992 1991 - Present: Chairman, 6 Pacific Advisors None 206 North Jackson Street Chairman President, and Director, Mutual Funds Suite 301 Pacific Global Investment Glendale, CA 91206 Management Company; Chairman and Director, Pacific Global Fund Distributors, Inc.; Chairman and Director, Pacific Global Investor Services, Inc. 1997 - 2001: Chairman and Director, Pacific Global Investment Fund, Ltd. Barbara A. Kelley (50) Treasurer Since 2001 2001 - Present: Executive 6 Pacific Advisors None 206 North Jackson Street Vice President, Treasurer, Mutual Funds Suite 301 Pacific Global Investment Glendale, CA 91206 Management Company; Treasurer and Director, Pacific Global Fund Distributors, Inc.; President and Treasurer, Pacific Global Investor Services, Inc. 1999 - Present: Director, Pacific Global Investment Management Company 1990 - 1999: President, Transamerica Financial Resources
56
NUMBER OF PORTFOLIOS IN POSITIONS(S) TERM OF OFFICES PRINCIPAL OCCUPATIONS FUND COMPLEX HELD WITH THE AND LENGTH OF DURING OVERSEEN BY OTHER DIRECTORSHIPS NAME, ADDRESS AND AGE COMPANY TIME SERVED PAST 5 YEARS TRUSTEE HELD BY TRUSTEE - ------------------------------------------------------------------------------------------------------------------------------------ L. Michael Haller (60) Director Since 1992 2004 - Present: Consultant 6 Pacific Advisors None 5924 Colodny Mutual Funds Agoura, CA 91301 2002 - 2004: Executive Vice President, Sammy Studios, Inc. (Entertainment Company) 2001 - 2002: Vice President and Executive Producer, Electronic Arts; President, International Media Group, Inc. (Entertainment Company) 1978 - 2001: Consultant, Asahi Broadcasting Corp. (Entertainment Company) Takashi Makinodan, Ph.D (79) Director Since 1995 1992 - Present: Director, 6 Pacific Advisors None 107 S. Barrington Place Medical Treatment Mutual Funds Los Angeles, CA 90049 Effectiveness Program (MEDTEP), Center on Asian and Pacific Islanders 1991 - Present: Associate Director of Research, Geriatric Research Education Clinic Center, VA Medical Center Gerald E. Miller (74) Director Since 1992 1992 - Present: Retired 6 Pacific Advisors None 5262 Bridgetown Place Mutual Funds Westlake Village, CA 91362 Louise K. Taylor, Ph.D (57) Director Since 1992 1991 - Present: 6 Pacific Advisors None 325 East Huntington Dr. Superintendent, Monrovia Mutual Funds Monrovia, CA 91016 Unified School District
Each director is elected to serve until the next annual shareholders meeting and until his or her successor is elected or appointed. The Company does not hold regular annual shareholders meetings to elect Directors. Vacancies on the Board can be filled by the action of a majority of the Directors, provided that at least two-thirds of the Directors have been elected by the shareholders. Certain Directors are considered "interested persons" of the Company as defined in the 1940 Act. All directors oversee all six Funds of the Company. 57 PACIFIC ADVISORS FUND INC. NOTES 58 NOTES 59 NOTES 60 [GRAPHIC] PACIFIC ADVISORS FUND INC DIRECTORS GEORGE A. HENNING, CHAIRMAN VICTORIA L. BREEN THOMAS M. BRINKER L. MICHAEL HALLER III TAKASHI MAKINODAN, PH.D. GERALD E. MILLER LOUISE K. TAYLOR, PH.D. OFFICERS GEORGE A. HENNING, PRESIDENT THOMAS H. HANSON, VICE PRESIDENT AND SECRETARY VICTORIA L. BREEN, ASSISTANT SECRETARY CATHERINE L. HENNING, ASSISTANT SECRETARY BARBARA A. KELLEY, TREASURER INVESTMENT MANAGER PACIFIC GLOBAL INVESTMENT MANAGEMENT COMPANY 206 NORTH JACKSON STREET, SUITE 301 GLENDALE, CALIFORNIA 91206 BALANCED FUND ADVISER BACHE CAPITAL MANAGEMENT, INC. 206 NORTH JACKSON STREET, SUITE 201 GLENDALE, CALIFORNIA 92106 TRANSFER AGENT AND ADMINISTRATOR PACIFIC GLOBAL INVESTOR SERVICES, INC. 206 NORTH JACKSON STREET, SUITE 301 GLENDALE, CALIFORNIA 91206 DISTRIBUTOR PACIFIC GLOBAL FUND DISTRIBUTORS, INC. 206 NORTH JACKSON STREET, SUITE 301 GLENDALE, CALIFORNIA 91206 (800) 989-6693 This report is submitted for the general information of the shareholders of the Fund. It is not authorized for distribution to prospective investors unless accompanied or preceded by a current effective prospectus of the Fund, which contains information concerning the investment policies of the Fund as well as other pertinent information. [GRAPHIC] PACIFIC GLOBAL FUND DISTRIBUTORS, INC. 206 NORTH JACKSON STREET, SUITE 301 GLENDALE, CALIFORNIA 91206 pg101.898 Item 2. Not required. Item 3. Not required. Item 4. Not required. Item 5. Not applicable. Item 6. (Reserved) Item 7. Not applicable. Item 8. Not applicable. Item 9. Submission of Matters to a Vote of Security Holders. On February 21, 2004, the Registrant adopted a Nominating Committee Charter that establishes procedures by which shareholders may recommend nominees to the Registrant's Board of Directors. Shareholders may submit recommendations for nominees to the Nominating Committee, c/o Pacific Global Investors Services Inc., at North Jackson Street, Suite 301, Glendale, CA 91206, which will forward any recommendations received to the members of the Nominating Committee. To be considered, shareholder recommendations must be received a reasonable time before the Registrant begins to print and mail proxy materials for the relevant shareholder meeting. Shareholder recommendations will be evaluated in light of the Registrant's needs and the criteria established in the Nominating Committee Charter. Shareholders will be informed of the right to recommend nominees to the Registrant's Board of Directors through the Registrant's [ prospectus. Item 10. Controls and Procedures. (a) Based upon their evaluation of the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) as conducted within 90 days of the filing date of this Form N-CSRS, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There have been no significant changes in the registrant's internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) or in other factors that could significantly affect these controls, including no significant deficiencies or material weaknesses that required corrective action, during the last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. Item 11. Exhibits (a)(1) Not applicable. (a)(2) Certifications required by Item 11(a) of Form N-CSRS and Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). (b) Certification required by Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). 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. Pacific Global Fund Inc. d/b/a Pacific Advisors Fund Inc. By: George A. Henning ----------------------------------- George A. Henning Chairman, Pacific Advisors Fund Inc. Date: September 8, 2004 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: /s/ George A. Henning ----------------------------------- George A. Henning Chief Executive Officer Date: September 8, 2004 By: /s/ Barbara A. Kelley ----------------------------------- Barbara A. Kelley Chief Financial Officer Date: September 8, 2004 EX-99.CERT 2 a2143002zex-99_cert.txt EX-99.CERT PACIFIC ADVISORS FUND Exhibit 11(a)(2) to Form N-CSR I, George A. Henning, certify that: 1. I have reviewed this report on Form N-CSRS of Pacific Global Fund Inc. d/b/a Pacific Advisors Fund Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) (reserved); (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this request based on such evaluation; (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. Date: September 8, 2004 Signature: /s/ George A. Henning ---------------------------- Chairman and Chief Executive Officer PACIFIC ADVISORS FUND Exhibit 11(a)(2) to Form N-CSR I, Barbara A. Kelley, certify that: 1. I have reviewed this report on Form N-CSRS of Pacific Global Fund Inc. d/b/a Pacific Advisors Fund Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) (reserved); (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. Date: September 8, 2004 Signature: /s/ Barbara A. Kelley ---------------------------- Chief Financial Officer EX-99.906CERT 3 a2143002zex-99_906cert.txt EX-99.CERT PACIFIC ADVISORS FUND EXHIBIT 11(b) to Form N-CSR Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 George A. Henning, Chairman and Chief Executive Officer, and Barbara A. Kelley, Chief Financial Officer, of Pacific Global Fund Inc. d/b/a Pacific Advisors Fund Inc. (the "Registrant"), each certify to the best of his and her knowledge that: 1. The Registrant's periodic report on Form N-CSRS for the period ended June 30, 2004 (the "Form N-CSRS") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Form N-CSRS fairly presents, in all material respects, the financial condition and results of operations of the Registrant. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSRS filed with the Commission. Date: September 8, 2004 Pacific Advisors Fund Inc. Pacific Advisors Fund Inc. /s/ George A. Henning /s/ Barbara A. Kelley - ------------------------------------ ------------------------------------- George A. Henning Barbara A. Kelley Chairman and Chief Executive Officer Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----