-----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, DJ7NofpQLHs7XbHWIeI/BK8AAxnTQhsqvgJOvIMa6BUYJ4YielH/GfQOMj7VFmUf jWQ5bWM0N4XpdMUjii5k0g== 0001047469-05-022582.txt : 20050907 0001047469-05-022582.hdr.sgml : 20050907 20050907123738 ACCESSION NUMBER: 0001047469-05-022582 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050907 DATE AS OF CHANGE: 20050907 EFFECTIVENESS DATE: 20050907 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: 051072217 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 a2162537zn-csrs.txt N-CSRS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-7062 PACIFIC GLOBAL FUND INC. D/B/A PACIFIC ADVISORS FUND INC. (Exact name of registrant as specified in charter) 101 NORTH BRAND BLVD., SUITE 1950 GLENDALE, CALIFORNIA 91203 (Address of principal executive offices) GEORGE A. HENNING 101 NORTH BRAND BLVD., SUITE 1950 GLENDALE, CA 91203 (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, 2005 Item 1. Report to Shareholders Filed herewith. [LOGO] PACIFIC ADVISORS - - FUND INC. [GRAPHIC] SEMI-ANNUAL REPORT JUNE 30, 2005 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 7 BALANCED FUND 12 GROWTH FUND 17 MULTI-CAP VALUE FUND 22 SMALL CAP FUND 26 SCHEDULE OF INVESTMENTS 30 STATEMENT OF ASSETS AND LIABILITIES 52 STATEMENT OF OPERATIONS 54 STATEMENT OF CHANGES IN NET ASSETS 56 NOTES TO FINANCIAL STATEMENTS 60 FINANCIAL HIGHLIGHTS 65
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. 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 August 22, 2005 Dear Shareholders: Mixed messages on the state of the economy brought much confusion into the market during the first half of the year. Despite evidence that the underlying economy was on a firm footing, investors faced a heightening sense of uncertainty. The U.S. economy, which has grown at a healthy pace over the past couple of years, showed signs of moderation. As a result, investors from Wall Street to Main Street worried that a recession might be imminent. Compounding this fear, the Federal Reserve continued its cycle of interest rate increases to keep inflation at bay and temper market speculation Even weather played a role in evaluating the state of the economy as hurricanes in the Southeast, record rainfalls in the West, and heavy snows in the East created business disruptions further dampened earnings in a quarter that is historically weak. MARKET REVIEW
JUNE 30, 2005 CLOSE YTD RETURN - ------------------------------------------------------------------------------- Dow Jones 10,274.97 - 4.71% S&P 500 1,191.33 - 1.70% NASDAQ 2,056.96 - 5.45% Russell 2000 (small cap) 639.66 - 1.25% 06/30/05 12/31/04 - ------------------------------------------------------------------------------- 10-Year T-Note Yield 3.94% 4.24%
Market conditions remained challenging in the second quarter. Volatility increased significantly on speculation of an economic "soft patch." Surprisingly strong economic and corporate earnings reports, however, helped end the quarter on a positive and promising note. This good news provided the stimulus for further market growth as we entered the third quarter. ECONOMIC OUTLOOK The U.S. economy continued to hum along in the first half of the year. Economic growth remained at a robust 3.8% rate through the first quarter. Growth moderated in the second quarter, but still reached a solid 3.5% annual rate. Additional economic data continue to support a favorable economic outlook: broad inflation remains muted despite rising energy prices; interest rates remain relatively low; and consumers continue to spend freely. Future growth should continue to reflect a vibrant, albeit uneven, economic expansion. MARKET PERSPECTIVE The equity markets remained trading range bound. Overall volatility rose as the market selectively emphasized the short-term impact of some economic data. The market also anticipated disappointing first quarter earnings announcements due to the harsh winter weather, rising short-term interest rates, and escalating oil prices. By late April, these fears led the equity market to the lower end of its trading band. First and second quarter earnings ultimately exceeded expectations. Healthy corporate profit growth and strong economic data helped boost investor confidence. While year-to-date performance remained disappointing, the market showed signs of a rebound as the second quarter closed. Through June 30th, the Dow Jones Industrials Average was down - 4.71%, the S&P 500 Index lost - 1.70% and the Nasdaq Composite fell - 5.45%. We believe that the equity markets will continue to fluctuate within a trading range. This will cause the market to be volatile and place a premium on good stock selection The interest rate CONUNDRUM persisted as the disconnect between short and long-term rates continued to grow during the second quarter. The benchmark 10-year T-Bond fell from 4.50% to 3.94% even as the Fed raised short-term rates another 0.50% to 3.25%. Long-term rates remained low as demand continued to outstrip the supply of high-quality bonds. Foreign governments with a large trade surplus bought U.S. Government bonds to help stimulate economic growth to maintain the demand for imports. Institutional investors were also heavy buyers of long-term bonds to manage future retirement income needs from the graying baby boomer population. Additionally, U.S. corporations had significant cash reserves limiting their need to issue corporate bonds. Lower interest rates enabled real estate values to appreciate rapidly as buyers took advantage of historically low rates. When long-term interest rates do rise, we anticipate a softening demand in real estate that will vary from region to region. As profits in real estate become more difficult to achieve, equity and fixed income markets may become more attractive investments. 1 [GRAPHIC] The risk of losing principal on long-term bonds continued to grow as short-term rates increased. This expectation of higher long-term rates further emphasized the importance of implementing a DEFENSIVE fixed income investment strategy. Our fixed income investment strategy in this phase of the economic cycle remains focused on protecting principal by investing mostly in shorter-term bonds. When long-term interest rates eventually rise, we anticipate buying longer-term bonds to lock in higher yields. Energy costs were also a major story during 2005. Energy prices have been rising as world demand has escalated. Counties such as China and India have experienced tremendous economic growth creating greater demand for energy in their business and consumer markets. We anticipate that global demand will continue to grow keeping pressure on energy costs for the foreseeable future. Despite the economic impact of higher energy prices, we believe the low inflation economy can continue to grow albeit at a more modest pace. It is important to keep in mind that higher energy costs will make alternative energy sources more attractive and, over the longer term, lessen the reliance on oil and gas as a primary fuel source. INVESTMENT REVIEW - THE HIGHS AND LOWS Prudent investment management during this period of heightened market volatility required patience and discipline. Seasoned investment experience was crucial to distilling market "noise" and making sound long-term investment decisions. We continued to maintain more defensive investment strategies to manage risk while taking advantage of select buying opportunities when the market hit the lower end of its trading range in April. Fixed income portfolios remained defensively positioned. The risk of losing principal outweighed the potential for gain from owning long-term bonds. In general, high-quality fixed income securities remained in limited supply which forced price up and yields down. When possible, we added positions in higher yielding, high-quality corporate bonds and preferred stocks. We also added positions in intermediate-term government agency notes for additional income and capital appreciation potential. LOOKING AHEAD The U.S. economy is healthy. Near-term inflationary pressures are expected to remain modest. GDP growth should continue for the foreseeable future although we do expect the pace of the economic expansion will moderate to between 3.0% and 3.5% by year-end. Likewise, we anticipate corporate earnings and profit growth will remain solid while slowing to a more moderate and sustainable pace. The market will likely remain trading range bound in response to moderating economic and profit growth. Once the Fed concludes its current series of interest rate increases, we anticipate that the equity markets will move up to new trading bands. In this volatile environment, careful stock selection and a disciplined investment strategy will remain key to managing risk and achieving long-term investment goals. We wish to express our appreciation for the trust and privilege you continue to place with us in managing your investments. Sincerely, /s/ George A. Henning George A. Henning 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, 2005, THE FUND HAD A TOTAL RETURN OF 1.16% FOR CLASS A SHARES, AND 0.86% FOR CLASS C SHARES. THE FUND'S BENCHMARK, THE LEHMAN INTERMEDIATE TREASURY BOND INDEX(1), RETURNED 1.62% DURING THE SAME PERIOD. Q WHAT WAS THE TREND IN LONG-TERM INTEREST RATES DURING THE FIRST SIX MONTHS? A Yields on intermediate and longer-term government securities remained relatively low. Insatiable demand for U.S. government securities allowed the U.S. government to continue financing longer-term debt without raising rates. U.S. government securities are generally considered one of the safest and therefore most desirable investments in the world. Much of the demand comes from foreign governments and investors which purchase nearly 60% of newly issued treasury notes. Growing trade surpluses in developing countries such as China and India left these countries with extra dollars to invest. In turn, their demand for U.S. government securities increased. Additionally, volatility and limited performance in the corporate bonds and equity markets made U.S. government securities even more attractive to investors. Q WHAT CHALLENGES DID THIS TREND CREATE? A The Federal Reserve has raised short-term interest rates by 2.5% over the past year. Typically, this would produce a similar rise in long-term interest rates. Instead, the growing demand for U.S. government securities kept long-term interest rates in a relatively tight trading channel. The benchmark 10-year T-Bond fluctuated between 3.89% and 4.64% during the first six months of the year. This volatility increased the interest rate risk on longer term bonds. While longer-term bonds offered slightly higher yields, they also carried a greater risk for capital depreciation. For example, an interest rate increase as small as 0.50% can result in a 10% drop in a long-term bond's value. Q DID YOU MAKE ANY SIGNIFICANT CHANGES TO THE PORTFOLIO IN 2005? A In this higher risk environment, we remained focused on protecting capital. We made only minor changes to the Fund's portfolio over the past six months. We managed interest rate risk by maintaining a relatively short average maturity between 5 and 7 years. Investments remained concentrated in government agency bonds, such as Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). Agency paper offered slightly better yields than treasury notes without a corresponding increase in risk. We maintained a smaller portion of the portfolio in equities as stock market volatility continued to afford few attractive and appropriate investments. Q WHAT SETS THE FUND APART FROM ITS PEERS? A We focus on PROTECTING PRINCIPAL and seeking TOTAL RETURN. Our investment strategy focuses on preserving capital, providing income, and seeking capital appreciation in a risk appropriate manner. Our TOTAL RETURN emphasis avoids the focus on YIELD which, during periods of rising interest rates, risks losing principal and eroding earning power. We ACTIVELY MANAGE our bond investments to preserve capital. Most government securities funds evenly distribute their investments across a range of maturities. This passive strategy limits the fund's ability to manage interest rate risk. By contrast, we identify an optimal maturity range based on current market and economic conditions. We concentrate the Fund's holdings in securities within this range which offer the greatest yield at the most appropriate level of risk for a conservative investor. We may also invest up to 20% of the portfolio in high-quality, income producing blue chip stocks to provide the opportunity for additional income and growth and protect against the effects of inflation. Q DO YOU EXPECT TO SEE A DRAMATIC RISE IN LONG-TERM RATES BEFORE THE END OF THE YEAR? A A dramatic rise in long-term rates will - ---------- (1) The Lehman Intermediate Treasury Bond Index is an unmanaged index of intermediate term government bonds since 12/31/80. 3 mostly likely come about ONLY if we see a significant increase in inflation or a marked decrease in the demand for U.S. government securities by foreign investors. Based on current data, we don't expect either of these changes to occur in the immediate future. However, rising energy prices and inflationary concerns will likely produce a modest rise in long-term rates during the coming months. Early next year, the U.S. government will begin selling 30 year Treasury bonds. It is difficult to project the impact that the longer term bonds will have on interest rates. However, we do expect demand to be strong as pension plans and other long term investors use these bonds to match their future asset and liability requirements. As we mentioned earlier, the potential of even a modest rise in rates can significantly increase the risk of a price decline in long-term bonds. Interest rate changes typically occur in a short period of time. A sustained rise in rates is often only apparent in hindsight. By the time a sustained rise is confirmed, long-term bond holders have often missed the opportunity to limit their losses. Q DO YOU ANTICIPATE MAKING ANY SIGNIFICANT CHANGES TO THE PORTFOLIO? A Near-term, we expect to make few changes to the maturity mix and composition between government and agency bonds holdings. We will maintain a shorter average maturity in light of increasing interest rate risk. Investments will remain concentrated in government agency securities which should continue to provide relatively more attractive yields. Improved equity market performance would prompt us to modestly increase equities holdings. We expect more opportunities in the last half of the year to add to the Fund's total return through investment in high-quality, dividend paying common stocks. Protecting principal and managing through this period of growing interest rate risk will remain our primary focus during the second half of the year. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Performance quoted represents past performance. Current performance may be higher or lower than the performance data quoted. Returns do not take into account the maximum 4.75% sales charge on Class A shares and would be lower if the sales charge were included. Returns represent the change in value over the stated period assuming reinvestment of dividends and capital gains at net asset value. Returns do not take into account individual taxes which may reduce actual returns when shares are sold. 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. For performance current to the most recent month-end call (800) 989-6693. 4 [CHART] PORTFOLIO HOLDINGS AS OF 06/30/05 (Based on Total Investments) 1. U.S. GOVERNMENT AGENCIES 86.76% 2. PREFERRED STOCK 6.26% 3. EQUITIES 5.56% 4. CASH AND CASH EQUIVALENTS 1.42%
5 EXPENSE EXAMPLES As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2005 through June 30, 2005. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid on your account during the period. The following transaction costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a front-end sales charge (load) of 4.75% on Class A shares; (2) a 2% redemption fee if you sell or exchange shares of the Fund within sixty days of purchase, with four exceptions. The fee does not apply to redemptions made under an automatic withdrawal program or periodic asset reallocation plan; redemptions to pay for expenses related to terminal illness, extended hospital or nursing home care, or other serious medical conditions; redemptions of shares acquired through dividend reinvestments; and redemptions of shares purchased before July 1, 2004; and (3) a $10 service fee on each exchange after the first five exchanges in each calendar year. The following ongoing costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a $12 low balance fee on accounts with balances of less than $250 as of September 30th of each calendar year and no investment activity (excluding reinvestment of dividends and/or capital gains) during the prior calendar year or the first nine months of the current calendar year. This fee does not apply to IRAs, qualified plan accounts, or Coverdell Education Savings Accounts; (2) a $15 annual custodial fee on IRAs, SEPs, SIMPLE IRAs, and Coverdell Education Savings Accounts; and (3) a $20 annual custodial fee on 403(b) accounts. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which in not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The following transaction costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a front-end sales charge (load) of 4.75% on Class A shares; (2) a 2% redemption fee if you sell or exchange shares of the Fund within sixty days of purchase, with four exceptions. The fee does not apply to redemptions made under an automatic withdrawal program or periodic asset reallocation plan; redemptions to pay for expenses related to terminal illness, extended hospital or nursing home care, or other serious medical conditions; redemptions of shares acquired through dividend reinvestments; and redemptions of shares purchased before July 1, 2004; and (3) a $10 service fee on each exchange after the first five exchanges in each calendar year. The following ongoing costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a $12 low balance fee on accounts with balances of less than $250 as of September 30th of each calendar year and no investment activity (excluding reinvestment of dividends and/or capital gains) during the prior calendar year or the first nine months of the current calendar year. This fee does not apply to IRAs, qualified plan accounts, or Coverdell Education Savings Accounts; (2) a $15 annual custodial fee on IRAs, SEPs, SIMPLE IRAs, and Coverdell Education Savings Accounts; and (3) a $20 annual custodial fee on 403(b) accounts. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 01/01/05 06/30/05 01/01/05 - 06/30/05(3) - --------------------------------------------------------------------------------------------------------- CLASS A SHARES Actual $ 1,000 $ 1,011.60 $ 9.23 Hypothetical (5% return before expenses) $ 1,000 $ 1,024.79 $ 9.29 CLASS C SHARES Actual $ 1,000 $ 1,008.60 $ 12.95 Hypothetical (5% return before expenses) $ 1,000 $ 1,024.79 $ 13.05
- ---------- (3) Expenses are equal to the Fund's annualized expense ratio of 1.85% for Class A shares and 2.60% for Class C shares, multiplied by the average account value over the period, multiplied by 181/365 days to reflect the one-half year period. 6 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 SIX MONTHS ENDED JUNE 30, 2005, THE FUND RETURNED - 0.23% FOR CLASS A SHARES, AND - 0.54% FOR CLASS C SHARES. THE FUND'S BENCHMARKS, THE S&P 500(1) AND THE LEHMAN INTERMEDIATE CORPORATE BOND INDEX(2), RETURNED, 1.50% AND - 0.81%, RESPECTIVELY. Q WHAT IS THE FUND'S PRIMARY INVESTMENT OBJECTIVE? A The Income and Equity Fund is designed to meet the investment needs of a more conservative investor who is risk averse. This type of investor comes in all shapes and sizes, but is often a retiree who has limited income and cannot tolerate significant investment losses. Capital preservation and safety are paramount to this Fund which is why we seek to effectively manage risk and volatility. Having said that, another inherent risk is the erosion of capital through inflation and taxes. This Fund provides a hedge against inflation and taxes by selecting a core holding of high quality equities and bonds that seek to preserve the principal investment while providing the opportunity for capital appreciation. Q WHAT ARE THE MOST COMMON MISCONCEPTIONS ABOUT THE EQUITY AND BOND MARKETS? A An investor buying a bond is essentially making a loan to that company or government entity. Government and corporate bonds are usually fairly straight-forward in that they are issued with pre-determined rates of return on each "loan" as well as a maturity date (the date upon which the principal or "loan amount" is paid back). A common misconception in owning bonds is that they are always stable, passive investments that do not require monitoring or managing. In fact, bonds change in value each day due to changes in interest rates. Close monitoring of interest rates is required to manage the proper selection of bonds to provide income while reducing price volatility. The truth is that successful bond investing DOES require on-going management. Unlike a bond, a stock holder buys an ownership portion, OR SHARE, of a company. Each shareholder has a right to a portion of the earnings distributed by the company as dividends and a right to share in the assets of the company. Since the value of those earnings and the value of the company are not guaranteed, there is more risk in owning stock. A common misconception is that all stocks carry significant risk and price volatility. Many stocks have a long history of steady dividend payments and relative price stability. Additionally, recent changes in federal tax laws have increased the importance of dividend payments to shareholders. As a result, investors can benefit from owning companies which pay attractive dividend rates and have lower price volatility. Owning stocks can boost income without adding significant risk to the shareholder. Q HOW IS RISK MANAGED IN THE FUND? A Investors often overlook the effects of inflation. In essence, inflation is the guarantee that your buying power will erode over time. In order to mitigate this guaranteed risk, the Fund focuses on achieving better-than-average returns while maintaining safety. For example, when investors place their money into no-risk or low-risk investments, such as savings accounts, CDs, or money market funds, they receive a predictable, steady yield. But, the trade-off for that safety is the reality that their income will never outpace inflation and taxes. The Income and Equity Fund seeks to provide reliable returns that are similar to that of a savings account or money market, but it doesn't stop there. It also takes the next step and seeks capital appreciation, when appropriate, to help ward off the effects of inflation. - ---------- (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. Index returns assume the reinvestment of dividends, but, unlike the Fund's returns, do not reflect the effects of management fees or expenses. (2) The Lehman Intermediate Corporate Bond Index is an unmanaged index of intermediate term U.S. corporate bonds since 01/01/73. 7 To accomplish this, we first look at the overall market trends to evaluate market volatility and economic momentum. During periods of market volatility, we reduce our exposure to bonds and equities. We focus on stocks which pay dividends or which have low price volatility. We concentrate on higher quality bonds and, in periods of rising interest rates, shorter maturity bonds. Throughout all market conditions, we carefully select high-quality government bonds, investment grade U.S. corporate bonds and dividend-paying blue-chip stocks. Q HOW DID THE FUND MEET THE MAJOR RISKS IN THE FIRST HALF OF THE YEAR? A For bonds, interest rates were the ongoing challenge. For equities, market volatility created many hurdles. In keeping with the goal of this Fund, protection of capital and risk management remained the top priority. The portfolio mix was adjusted to increase the fixed income holdings to approximately 70 percent of the portfolio. We maintained a solid mix of high-quality corporate bonds, Government and Government Agency bonds, and preferred stocks. To minimize the risk of price depreciation, the average maturity of the bond portfolio was kept at approximately five to seven years. Equities comprised about 23 percent of the Fund. While the top 10 equity holdings remained the same through this period, the overall equity holdings were constantly re-evaluated, added to, and pruned for maximum performance. The equity market didn't offer superior opportunities to add new names which would fit into the investment philosophy of the Fund. Q WHY DID YOU INVEST A GREATER PORTION OF THE FUND IN GOVERNMENT AGENCIES? A. Compared with the U.S. Treasuries and corporate bonds, U.S. Government Agencies have offered a valuable alternative. The current economic environment has allowed corporate America to refinance its existing debt. Consequently, many corporations have had little need to issue new bonds. The majority of corporate America is sitting on large cash reserves which they have used to fund most of their major corporate expenditures. These factors have led to a limited supply of higher yielding corporate bonds. And, an increase in cash reserves has created an environment of improved shareholder value through higher dividend payments, increased mergers & acquisition activity, and stock repurchases. Interest rates and inflation have remained low for a longer period than normal. There are several reasons for this: a lingering effect of the post Y2K spending slowdown; the recession following 9/11; the impact on businesses of the Sarbanes-Oxley reforms as well as an overall conservative approach to debt. Many corporations, having accumulated cash, have been reluctant to expand their businesses through debt financing. Instead, many have been buying back stock or making acquisitions with offers of cash and/or stock. U.S. Government Treasury Notes and Bonds have been in high demand from virtually every developed country. This demand has led to a limited supply and kept interest rates low. As a consequence, U.S. Government Treasuries have not offered a competitive return over other Government or corporate debt issues. This left a new opening for U.S. Government Agencies, such as investments in Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) which pay higher interest rates than U.S. Treasuries for similar maturity dates. These investments have benefited the Fund by providing better yields without significantly increasing risk. Q DO YOU EXPECT SIGNIFICANT CHANGES IN THE BOND AND EQUITY MARKETS IN THE COMING MONTHS? A. We see the foundation for solid, although uneven, economic and market growth. Inflation should remain moderate. These factors are expected to provide a lift for both markets. For bonds, a modest rise in long-term rates will provide better yields; although we expect they will still be somewhat limited. As interest rates peak, the economic climate should provide opportunities for capital appreciation For equities, a much-needed catalyst for sustained upward momentum is necessary before the market can break through its restricted, yet volatile trading range. Perhaps several more months, or even years, will need to play out before the conditions allow the market to once again find a solid footing with continued, sustainable momentum. 8 Q HOW WILL YOU MANAGE THE FUND'S INVESTMENTS IN THE LAST HALF OF THE YEAR? A. As always, we will remain sensitive to managing risk. This has been, and will continue to be, the cornerstone of the Fund's investment policy. For the fixed income portion of the portfolio, we will continue use shorter-term maturities until the Fed signals it is ready to end its increases to interest rates. Consequently, we will await better yield opportunities on long bonds before extending the Fund's average maturity. We expect the equity market to show improved performance, although volatility will likely persist. Judiciously, we may increase the equity allocation up towards 25 to 30 percent of the portfolio to take advantage of positive economic conditions. This increase in equities will help position the Fund for improved total return opportunities while keeping risk to a minimum. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Performance quoted represents past performance. Current performance may be higher or lower than the performance data quoted. Returns do not take into account the maximum 4.75% sales charge on Class A shares and would be lower if the sales charge were included. Returns represent the change in value over the stated period assuming reinvestment of dividends and capital gains at net asset value. Returns do not take into account individual taxes which may reduce actual returns when shares are sold. 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. For performance current to the most recent month-end call (800) 989-6693. 9 [CHART] PORTFOLIO HOLDINGS AS OF 06/30/05 (Based on Total Investments) 1. CORPORATE BONDS 53.50% EQUITIES 22.48% 2. Financials 7.79% 3. Other Equities 14.69% 4. U.S. GOVERNMENT AGENCIES 15.94% 5. PREFERRED STOCK 4.51% 6. CONVERTIBLE CORPORATE BONDS 2.03% 7. CASH AND CASH EQUIVALENTS 1.54%
10 EXPENSE EXAMPLES As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2005 through June 30, 2005. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid on your account during the period. The following transaction costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a front-end sales charge (load) of 4.75% on Class A shares; (2) a 2% redemption fee if you sell or exchange shares of the Fund within sixty days of purchase, with four exceptions. The fee does not apply to redemptions made under an automatic withdrawal program or periodic asset reallocation plan; redemptions to pay for expenses related to terminal illness, extended hospital or nursing home care, or other serious medical conditions; redemptions of shares acquired through dividend reinvestments; and redemptions of shares purchased before July 1, 2004; and (3) a $10 service fee on each exchange after the first five exchanges in each calendar year. The following ongoing costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a $12 low balance fee on accounts with balances of less than $250 as of September 30th of each calendar year and no investment activity (excluding reinvestment of dividends and/or capital gains) during the prior calendar year or the first nine months of the current calendar year. This fee does not apply to IRAs, qualified plan accounts, or Coverdell Education Savings Accounts; (2) a $15 annual custodial fee on IRAs, SEPs, SIMPLE IRAs, and Coverdell Education Savings Accounts; and (3) a $20 annual custodial fee on 403(b) accounts. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which in not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The following transaction costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a front-end sales charge (load) of 4.75% on Class A shares; (2) a 2% redemption fee if you sell or exchange shares of the Fund within sixty days of purchase, with four exceptions. The fee does not apply to redemptions made under an automatic withdrawal program or periodic asset reallocation plan; redemptions to pay for expenses related to terminal illness, extended hospital or nursing home care, or other serious medical conditions; redemptions of shares acquired through dividend reinvestments; and redemptions of shares purchased before July 1, 2004; and (3) a $10 service fee on each exchange after the first five exchanges in each calendar year. The following ongoing costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a $12 low balance fee on accounts with balances of less than $250 as of September 30th of each calendar year and no investment activity (excluding reinvestment of dividends and/or capital gains) during the prior calendar year or the first nine months of the current calendar year. This fee does not apply to IRAs, qualified plan accounts, or Coverdell Education Savings Accounts; (2) a $15 annual custodial fee on IRAs, SEPs, SIMPLE IRAs, and Coverdell Education Savings Accounts; and (3) a $20 annual custodial fee on 403(b) accounts. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 01/01/05 06/30/05 01/01/05 - 06/30/05(4) - --------------------------------------------------------------------------------------------------------- CLASS A SHARES Actual $ 1,000 $ 997.70 $ 9.66 Hypothetical (5% return before expenses) $ 1,000 $ 1,024.79 $ 9.79 CLASS C SHARES Actual $ 1,000 $ 994.60 $ 13.35 Hypothetical (5% return before expenses) $ 1,000 $ 1,024.79 $ 13.56
- ---------- (4) Expenses are equal to the Fund's annualized expense ratio of 1.95% for Class A shares and 2.70% for Class C shares, multiplied by the average account value over the period, multiplied by 181/365 days to reflect the one-half year period. 11 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, 2005, THE FUND RETURNED 1.27% FOR CLASS A SHARES, AND 0.93% FOR CLASS C SHARES. THE FUND'S BENCHMARKS, THE S&P 500(1) AND THE LEHMAN INTERMEDIATE CORPORATE BOND INDEX(2), RETURNED, 1.50% AND - 0.81%, RESPECTIVELY. Q WHAT WERE THE PRIMARY MARKET CHALLENGES IN THE FIRST HALF OF THE YEAR? A There was heightened ambiguity in two specific areas - interest rates and inflation. These factors created a nervous stock market environment, despite solid data showing that economic growth was occurring at a measured pace. "Three steps and a stumble" was the mantra for the period. Just as the market started to gain momentum, it would be tripped by an interest rate increase. Shareholder anxiety ran high and translated into sluggish, almost anemic trading activity. Even as most the economic indicators pointed to continued growth, investors appeared to have gone on strike. The market couldn't sustain a rally. Specifically for stocks, the challenge was a tightly restricted, more volatile, "trading range" market which yielded limited results. In response, investors redoubled their efforts in search for higher returns. They kicked up their tolerance for risk and began chasing riskier investments such as real estate and hedge funds. For bonds, there was a curious detachment between short and long-term interest rates. Long-term rates essentially stood still while short-term rates increased. This relationship surprised even Federal Reserve Chairman Alan Greenspan who referred to this disconnect as the "great conundrum." Additionally, the supply of bonds was unable to keep up with demand. U.S. Government bonds are arguably the most desired investment anywhere on the globe. Throughout the first half of the year, China, and other Asian and European countries had two powerful assets: strong currency values and excess American dollars from their trade surpluses. They reinvested large amounts of their surplus cash back into the United States through their purchase of U.S. Government Bonds. The high demand for these bonds helped to keep long-term interest rates low despite increases in short-term rates by the Federal Reserve. Q IT HAS BEEN SAID THAT MANAGING A BALANCED FUND IS LIKE MANAGING TWO SEPARATE FUNDS. DO YOU AGREE? A Yes. This Fund is a demonstration of the strength of diversification. In order to effectively manage risk while seeking an above average return, it's critical to employ separate and distinct investment strategies for each portfolio within the overall Fund. I've managed the Balanced Fund since 1994, and I'm always wearing two hats: one for bonds; the other for equities. The bond and equity markets can be polar opposites, which make them excellent counterbalances for one another. Stock and bond performance are both linked to interest rates, but that's where the similarities end. Higher interest rates translate into greater bond yields. The opposite is true in stocks, which typically decline, but in an unpredictable, chaotic fashion. Our strategy positions the bond holdings to provide a predictable, stable revenue stream and to lower overall portfolio volatility. Equities are used to generate capital appreciation and provide a hedge against inflation and taxes. These counterbalanced portfolios create a "steady as she goes" result. The Fund is not designed to ride the waves, but rather to be a safe, solid cornerstone to any investment plan. Its objective is to adapt to changing economic events in a manner which will provide steady growth with limited volatility. - ---------- (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. Index returns assume the reinvestment of dividends, but, unlike the Fund's returns, do not reflect the effects of management fees or expenses. (2) The Lehman Intermediate Corporate Bond Index is an unmanaged index of intermediate term U.S. corporate bonds since 01/01/73. 12 Q HOW DID YOU ACHIEVE A SOLID TOTAL RETURN IN SUCH A VOLATILE MARKET? A Diversification and a proper asset allocation mix were central to the Fund's solid returns. We continually monitor the asset allocation mix between equities and bonds. When new economic information suggests a shift in the current trend of the market, the Fund is adjusted. Recognizing the economy would continue to grow, the equity portion of the Fund was increased modestly. This continued to position the Fund for greater growth potential while protecting the core assets with lower risk bond holdings. Before moving into more equities, we sought data from several sources to provide confirmation that economic growth would remain strong. To protect capital and maintain lower volatility, equity investments were focused on high-quality companies in a variety of businesses with proven track records. I avoided overweighting any specific market sector to limit risk. On the bond side, I continued to increase the short-term holdings. As mentioned earlier, short-term interest rates rose, but long-term interest rates did not. While long term bonds did produce marginally higher yields, the risk to capital far outweighed the potential rewards. When interest rates are going up, I stay short to protect principal. When interest rates near a peak in the cycle, I invest in longer term bonds to lock in higher yields. That way, as the cycle changes and interest rates decline, the Fund can benefit from both higher yields and appreciation of the bonds. Q WHERE DID YOU UNCOVER EQUITY OPPORTUNITIES IN THE FIRST HALF OF 2005? A I didn't reinvent the wheel but stayed with the solid performers and added to their positions, where appropriate. As always, the primary strategy is to: buy quality companies at deep discount. Case in point: Banco Latino is a solid, high-quality financial institution that does business in Central and South America. In the first half of the year, the Argentine Government announced that it would default on its bonds, and then renegotiate with its bond holders to buy them back at a small percentage of their original value. The market began to sell the stocks of South and Central American companies on the assumption that they would have significant losses in their bond portfolios. Rather than simply avoiding this potential investment opportunity, I examined Banco Latino's holdings in Argentine Government bonds. I determined that, while it would have a negative impact, the equity markets had overreacted and that this would be an attractive investment for the Fund. I bought shares at an incredibly deep discount; almost 90 percent discount, and continued to pick up additional shares as its price began to rise. The stock has since bounced back to its original levels and has issued a round of dividends. This holding has performed well and continues to provide growth potential for the Fund. Let me wrap up by saying it's not always a good idea to buy when troubles arise, and that's not what I do. I carefully weigh the issues and pay particular attention to litigation risks because they are often very difficult to determine over the long term. I don't automatically stay with the crowd, or go against it. Instead, I allow careful, methodical research to point me to the best decision for the Fund. Q WHERE DO YOU SEE OPPORTUNITIES FOR THE BALANCED FUND IN THE REMAINDER OF THE YEAR? A I see optimism in the market, which should enable the equity markets to move higher. As long-term interest rates eventually increase, we would anticipate a dampening of the real estate market, which should bring investors back into the stock market. The economic arrows are pointing toward slow, moderate growth. I'll continue to look at sectors that I expect will enjoy a more favorable climate in the future, such as pharmaceuticals. When there is evidence that the current action of the Federal Reserve to raise interest rates is nearing completion, then we will look to expand the fixed income position in order to take advantage of the higher rates on longer-term bonds. Until long-term interest rates move higher, the Fund will maintain its position in shorter term bonds. With continued economic expansion likely, the Fund will maintain a greater weighting in equities. One area of interest is the technology sector where I am researching high quality holdings that can be competitive in growth areas such as 13 internet search engines or communications. Most likely, the Fund will also see some paring back in its retail holdings. This sector has benefited from lower interest rates but will probably see some earnings pull-back as interest rates on consumer credit starts to rise. I am and also looking for opportunities in other businesses such as telecommunications and electronics. We anticipate that the Fed will most likely complete its cycle of interest rate increases during this year or early next year. While energy costs will remain higher, overall inflation should be nominal. While it is difficult to predict, I do believe that two things will happen: longer-term bond yields will go up. This will cause the real estate market to cool off. Reasonably modest economic growth in conjunction with historically low inflation and low interest rates should provide the catalyst for continued growth in the Fund. As always, my objective is to position the Fund to reap the benefits of longer-term, economic, market, and company-specific trends on the horizon. I am optimistic that the slower growing economy will continue to provide good investment opportunities while managing the risk and volatility of the Fund. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Performance quoted represents past performance. Current performance may be higher or lower than the performance data quoted. Returns do not take into account the maximum 5.75% sales charge on Class A shares and would be lower if the sales charge were included. Returns represent the change in value over the stated period assuming reinvestment of dividends and capital gains at net asset value. Returns do not take into account individual taxes which may reduce actual returns when shares are sold. 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. For performance current to the most recent month-end call (800) 989-6693. 14 [CHART] PORTFOLIO HOLDINGS AS OF 06/30/05 (Based on Total Investments) EQUITIES 61.04% 1. Energy 10.33% 2. Financials 9.61% 3. Industrials 9.53% 4. Health Care 9.41% 5. Consumer Discretionary 6.10% 6. Information Technology 5.28% 7. Materials 4.81% 8. Other Equities 5.97% 9. CORPORATE BONDS 34.67% 10. CASH AND CASH EQUIVALENTS 3.74% 11. U.S. GOVERNMENT AGENCIES 0.56%
15 EXPENSE EXAMPLES As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2005 through June 30, 2005. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid on your account during the period. The following transaction costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a front-end sales charge (load) of 5.75% on Class A shares; (2) a 2% redemption fee if you sell or exchange shares of the Fund within six months of purchase, with four exceptions. The fee does not apply to redemptions made under an automatic withdrawal program or periodic asset reallocation plan; redemptions to pay for expenses related to terminal illness, extended hospital or nursing home care, or other serious medical conditions; redemptions of shares acquired through dividend reinvestments; and redemptions of shares purchased before July 1, 2004; and (3) a $10 service fee on each exchange after the first five exchanges in each calendar year. The following ongoing costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a $12 low balance fee on accounts with balances of less than $250 as of September 30th of each calendar year and no investment activity (excluding reinvestment of dividends and/or capital gains) during the prior calendar year or the first nine months of the current calendar year. This fee does not apply to IRAs, qualified plan accounts, or Coverdell Education Savings Accounts; (2) a $15 annual custodial fee on IRAs, SEPs, SIMPLE IRAs, and Coverdell Education Savings Accounts; and (3) a $20 annual custodial fee on 403(b) accounts. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which in not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The following transaction costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a front-end sales charge (load) of 5.75% on Class A shares; (2) a 2% redemption fee if you sell or exchange shares of the Fund within six months of purchase, with four exceptions. The fee does not apply to redemptions made under an automatic withdrawal program or periodic asset reallocation plan; redemptions to pay for expenses related to terminal illness, extended hospital or nursing home care, or other serious medical conditions; redemptions of shares acquired through dividend reinvestments; and redemptions of shares purchased before July 1, 2004; and (3) a $10 service fee on each exchange after the first five exchanges in each calendar year. The following ongoing costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a $12 low balance fee on accounts with balances of less than $250 as of September 30th of each calendar year and no investment activity (excluding reinvestment of dividends and/or capital gains) during the prior calendar year or the first nine months of the current calendar year. This fee does not apply to IRAs, qualified plan accounts, or Coverdell Education Savings Accounts; (2) a $15 annual custodial fee on IRAs, SEPs, SIMPLE IRAs, and Coverdell Education Savings Accounts; and (3) a $20 annual custodial fee on 403(b) accounts. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 01/01/05 06/30/05 01/01/05 - 06/30/05(4) - -------------------------------------------------------------------------------------------------------- CLASS A SHARES Actual $ 1,000 $ 1,012.70 $ 12.63 Hypothetical (5% return before expenses) $ 1,000 $ 1,024.79 $ 12.70 CLASS C SHARES Actual $ 1,000 $ 1,009.30 $ 16.34 Hypothetical (5% return before expenses) $ 1,000 $ 1,024.79 $ 16.47
- ---------- (4) Expenses are equal to the Fund's annualized expense ratio of 2.53% for Class A shares and 3.28% for Class C shares, multiplied by the average account value over the period, multiplied by 181/365 days to reflect the one-half year period. 16 PACIFIC ADVISORS Growth Fund INVESTS PRIMARILY IN COMPANIES THAT ARE A PART OF THE S&P 500 INDEX(1) OR THE NASDAQ 100 INDEX(2). INTERVIEW WITH PORTFOLIO MANAGER THOMAS H. HANSON FOR THE SIX MONTHS ENDED JUNE 30, 2005, THE FUND RETURNED - 2.07% FOR CLASS A SHARES, AND - 2.44% FOR CLASS C SHARES. THE FUND'S BENCHMARKS, THE S&P 500 AND THE RUSSELL 1000(3), CHANGED - 0.81% AND 0.11%, RESPECTIVELY, DURING THE SAME PERIOD. Q HOW WOULD YOU CHARACTERIZE THE MARKET DURING THE FIRST HALF OF 2005? A The market remained event-driven and erratic in the first six months of 2005. The 2004 year-end rally stretched into the first ten days of January and then quickly dissipated. The market retreated in response to increases in short-term interest rates by the Federal Reserve, mixed earnings signals from corporate America, and a resurgence of hostilities in the Middle East. In May, market performance began to improve. Positive first quarter earnings reports, strong economic growth, and tame inflation lifted investor sentiment. Overall, however, the market remained in a "trading range" staying within a relatively narrow channel of highs and lows. Q HOW DID YOU MANAGE THE FUND PORTFOLIO IN THIS MARKET? A The Fund's long-term strategy continued to guide our investment decisions in the first half of the year. We remained focused on investing in stocks within the leading sectors and industries of the market that offered "growth-at-a-reasonable-price." The most significant change to the portfolio was an increase in cash holdings. We more than doubled the Fund's cash position in response to increased market volatility and risk. This defensive tactic helped protect gains and put the Fund in position to take advantage of new investment opportunities once market volatility subsides. Q WHAT SECTORS AND INDUSTRIES DID YOU TARGET? A In the past six months, there was little change in the sectors and industries that led the market. We added few new positions to the portfolio and took advantage of opportunities to increase existing positions. In general, we continued to concentrate investments in two types of sectors and industries. We maintained greater exposure to companies benefiting from global economic growth. This included industrial firms such as GENERAL ELECTRIC and HONEYWELL; basic commodity producers such as LOUISIANA PACIFIC and GEORGIA PACIFIC; and oil related companies such as EXXONMOBIL, APACHE CORPORATION, and BURLINGTON RESOURCES. As a counterbalance to manage risk, we also held larger positions in more defensive industries and sectors. We continued to focus primarily on the healthcare sector with investments in ST. JUDE MEDICAL, JOHNSON & JOHNSON, CAREMARK RX, and ZIMMER HOLDINGS. We complemented these holdings with positions in the leading stocks of other select sectors and industries. For example, APPLEBEES, the nation's largest restaurant chain; HOME DEPOT, the nation's second largest retailer; bellwether technology firms such as MICROSOFT and ORACLE; and regional telecommunications leaders such as CITIZENS COMMUNICATIONS. This kept the Fund diversified and took advantage of growth opportunities in other areas of the market. Q WHAT ARE THE PREVAILING MYTHS OR MISCONCEPTIONS IN THE MARKET TODAY? A The most prevalent misconception may be that the economy isn't growing fast enough. In fact, the economy continues to expand at a healthy, if not robust, pace. The GDP grew at an annual rate of 3.8% in the first quarter and 3.4% in the second - ---------- (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. Index returns assume the 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, market capitalization weighted measure of the 100 largest non-financial domestic and international common stocks listed on The Nasdaq Stock Market. Index returns assume the reinvestment of dividends, but, unlike the Fund's returns, do not reflect management fees or expenses. (3) 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. Index returns assume the reinvestment of dividends, but, unlike the Fund's returns, do not reflect the effects of capital gains, management fees, or expenses. 17 quarter. This rate exceeds the benchmark for positive growth of 2.5% to 3.0% as well as the historical average GDP growth rate of 2.5%(4). Economic growth always becomes more moderate as the economy transitions from a recovery to an expansionary phase. It is important to remain focused on the long-term outlook and not to become impatient with a more uneven pace of economic growth. The economy and individual companies can typically sustain moderate growth much longer than unbridled growth. This creates an attractive long-term outlook for the economy, and, by extension, for growth stocks. The other common myth is that the market is irrational. Every market movement is a response to a stimulus. These stimuli, or concerns, however, may be considered irrational or unfounded. What may be construed as irrational behavior can be better characterized as impulsive reactions to news or "market noise." Q HOW DO YOU RISE ABOVE THE "MARKET NOISE" TO MAKE WISE INVESTMENT DECISIONS? A Today's 24-hour news cycle creates an excessive amount of "market noise." There is "cyclical noise," such as the quarterly flurry of corporate earnings announcements, and "topical noise," such as economic, geopolitical, or company-specific events. Discipline and experience allows us to discriminate between noise and news. A good rule of thumb is to think of each headline as a single crumb, not the whole cake. The danger comes when a single bit of information is not considered in its full context. Initially, the market tends to react to events before weighing their real long-term implications. This can result in a sudden and significant decline for a stock, an industry, or the overall market. Such dips are not necessarily an indication to sell a particular position. If the market has overreacted to a certain bit of news, an attractive buying opportunity may be the result. Q GROWTH FUNDS AREN'T TYPICALLY KNOWN FOR THEIR FOCUS ON RISK MANAGEMENT. WHY IS RISK MANAGEMENT IMPORTANT TO THIS FUND? A Investors often equate a growth fund with a speeding race car. Most growth funds focus primarily on producing the highest possible rate of return. They typically employ aggressive investment strategies to achieve this goal. This results in a higher degree of risk which may only be appropriate and acceptable only for highly aggressive investors. Our Fund seeks to provide more moderate and conservative investors with a suitable growth investment. We believe investors can take advantage of the opportunities in the growth area of the market without being overly aggressive. We manage risk by avoiding highly speculative sectors and stocks in search of companies that offer "growth-at-a-reasonable price." We also use cash as a defensive tool. The flexibility to invest a significant portion of the Fund in cash allows us to manage risk during periods of greater volatility in the market. Q WHAT CAN WE EXPECT FROM THE MARKET AND THE FUND IN THE NEXT SIX MONTHS? A We expect the market will remain in a "trading range" for the foreseeable future. This will continue to create a challenging, and at times frustrating, market environment. It can also produce valuable opportunities for disciplined and experienced investors. It is important for investors to temper unrealistic expectations for dramatic and immediate returns and seek investments that offer solid long-term growth potential. We believe the economy and corporate earnings will continue to grow at a moderate pace. Nevertheless, the market will likely remain in a slump until the Fed signals an end to its interest rate increases. We expect the short-term interest rate increases to end sometime in the fall which should produce a sustainable market rally. We believe the Fund is well positioned to capitalize on the changes in the market during the last half of the year. When we confirm a sustained upward trend in the market, we will reduce the Fund's cash position and take advantage of new investment opportunities. We expect these opportunities will continue to come primarily from the basic materials, industrial, oil, and healthcare sectors. (4) Bureau of Economic Analysis, 2005 final and preliminary estimates, respectively. University of Washington, Economic Department, UNCERTAIN TREND OF U.S. GDP, 1998, average GDP growth from 1973 to 1997. 18 PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Performance quoted represents past performance. Current performance may be higher or lower than the performance data quoted. Returns do not take into account the maximum 5.75% sales charge on Class A shares and would be lower if the sales charge were included. Returns represent the change in value over the stated period assuming reinvestment of dividends and capital gains at net asset value. Returns do not take into account individual taxes which may reduce actual returns when shares are sold. 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. For performance current to the most recent month-end call (800) 989-6693. 19 [CHART] PORTFOLIO HOLDINGS AS OF 06/30/05 (Based on Total Investments) EQUITIES 72.49% 1. Health Care 22.89% 2. Energy 16.71% 3. Materials 12.38% 4. Industrials 7.07% 5. Information Technology 5.89% 6. Other Equities 7.55% 7. CASH AND CASH EQUIVALENTS 27.51%
20 EXPENSE EXAMPLES As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2005 through June 30, 2005. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid on your account during the period. The following transaction costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a front-end sales charge (load) of 5.75% on Class A shares; (2) a 2% redemption fee if you sell or exchange shares of the Fund within six months of purchase, with three exceptions. The fee does not apply to redemptions made under an automatic withdrawal program or periodic asset reallocation plan; redemptions to pay for expenses related to terminal illness, extended hospital or nursing home care, or other serious medical conditions; and redemptions of shares acquired through dividend reinvestments; and (3) a $10 service fee on each exchange after the first five exchanges in each calendar year. The following ongoing costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a $12 low balance fee on accounts with balances of less than $250 as of September 30th of each calendar year and no investment activity (excluding reinvestment of dividends and/or capital gains) during the prior calendar year or the first nine months of the current calendar year. This fee does not apply to IRAs, qualified plan accounts, or Coverdell Education Savings Accounts; (2) a $15 annual custodial fee on IRAs, SEPs, SIMPLE IRAs, and Coverdell Education Savings Accounts; and (3) a $20 annual custodial fee on 403(b) accounts. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which in not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The following transaction costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a front-end sales charge (load) of 5.75% on Class A shares; (2) a 2% redemption fee if you sell or exchange shares of the Fund within six months of purchase, with three exceptions. The fee does not apply to redemptions made under an automatic withdrawal program or periodic asset reallocation plan; redemptions to pay for expenses related to terminal illness, extended hospital or nursing home care, or other serious medical conditions; and redemptions of shares acquired through dividend reinvestments; and (3) a $10 service fee on each exchange after the first five exchanges in each calendar year. The following ongoing costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a $12 low balance fee on accounts with balances of less than $250 as of September 30th of each calendar year and no investment activity (excluding reinvestment of dividends and/or capital gains) during the prior calendar year or the first nine months of the current calendar year. This fee does not apply to IRAs, qualified plan accounts, or Coverdell Education Savings Accounts; (2) a $15 annual custodial fee on IRAs, SEPs, SIMPLE IRAs, and Coverdell Education Savings Accounts; and (3) a $20 annual custodial fee on 403(b) accounts. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 01/01/05 06/30/05 01/01/05 - 06/30/05(5) - -------------------------------------------------------------------------------------------------------- CLASS A SHARES Actual $ 1,000 $ 979.30 $ 13.01 Hypothetical (5% return before expenses) $ 1,000 $ 1,024.79 $ 13.30 CLASS C SHARES Actual $ 1,000 $ 975.60 $ 16.65 Hypothetical (5% return before expenses) $ 1,000 $ 1,024.79 $ 17.07
- ---------- (5) Expenses are equal to the Fund's annualized expense ratio of 2.65% for Class A shares and 3.40% for Class C shares, multiplied by the average account value over the period, multiplied by 181/365 days to reflect the one-half year period. 21 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, 2005, THE FUND RETURNED - 2.12% FOR CLASS A SHARES, AND - 2.43% FOR CLASS C SHARES. THE FUND'S BENCHMARK, THE S&P 500(1) RETURNED - 0.81% DURING THE SAME PERIOD. Q WHY DID THE FUND UNDER-PERFORM THE MARKET IN THE FIRST HALF OF 2005? A Overall market performance lagged in the first six months of the year in response to economic, earnings, and geopolitical uncertainties. A number of the companies in the Fund's portfolio were affected by increased volatility in the overall market. Market volatility had the greatest impact on small cap stocks in particular. We painstakingly research a company - sometimes for years - before making an investment. When we invest, we select companies that will add long-term value to the Fund over a period of 2 to 3 years. In the first half of the year, we extensively reviewed the holdings in the portfolio and confirmed their underlying values. One example is ENDO PHARMACEUTICALS, a pain management company with strong leadership and excellent long-term growth. Earlier in the year, Endo encountered a patent dispute over a highly anticipated product. Research confirmed the company's long-term outlook remained highly favorable even if it lost the patent dispute. As its price declined, we took the opportunity to add to the Fund's position. Endo ultimately won the patent dispute and the stock recovered adding value to the Fund. Q HOW DO YOU UNCOVER VALUE INVESTMENT OPPORTUNITIES? A We use a "bottoms-up" approach to value investing. Stock selection begins by looking at individual companies as opposed to broad industries or sectors. We search for companies with unique "stories." A "story" may be an innovative business model, a niche product, or presence in an industry with long-term growth potential and little or no competition. Initial interest leads to a more extensive evaluation of a company's value and long-term growth potential. Finally, we look for positive catalysts that we believe will lead to greater market recognition for the company's stock. Catalysts may include a change in management, improving financials, or broader changes in the overall economy. It is impossible to predict exactly when the market will reward the value in any given company. Market recognition is not always instantaneous, and in some cases, may take several quarters to materialize. In keeping with the Fund's long-term investment approach, we seek companies that we believe will add long-term value over a period of 2 to 3 years. Q IF A STOCK DECLINES, HOW DO YOU DETERMINE WHETHER TO SELL OR HOLD THE POSITION? A In today's market, a stock can experience a significant decline in price at the first hint of negative news - whether real or perceived. A good portfolio manager must be an individual, not part of the crowd. Investment decisions must be guided by a disciplined, long-term strategy and not knee jerk reactions to market noise. Every long-term investment will experience periodic setbacks. Temporary declines may be the result of company-specific events or broader market conditions. When a stock declines, many questions are asked: Is the decline the result of company-specific problems? Is the company facing a temporary or long-term setback? Has the company's fundamental value changed? How quickly can the company and the stock recover? When companies are properly selected, they are worth holding through temporary setbacks. If our analysis confirms that a company's value and long-term prospects remain intact, we will hold the Fund's position. In some cases, we may take advantage of other's panic and add to the Fund's position at a discount. - ---------- (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. Index returns assume the reinvestment of dividends, but, unlike the Fund's returns, do not reflect the effects of management fees or expenses. 22 Q WHAT ECONOMIC FACTORS ARE HAVING THE GREATEST IMPACT ON THE MARKET? A Interest rates and oil prices. Rising interest rates generally discourage spending resulting in slower economic growth. Higher energy costs can also create a drag on economic growth by reducing discretionary spending and stimulating inflation. So far, the economy has been able to absorb higher energy costs and interest rates with little impact on economic growth. The market, however, remains concerned that a continued rise in interest rates or oil prices will weaken the economy and corporate profit growth in the near future. While the market will remain sensitive to a number of other factors, interest rates and oil prices will likely continue to have the greatest impact on market performance for the foreseeable future. Q HOW HAVE THESE FACTORS INFLUENCED PORTFOLIO MANAGEMENT? A Individual company analysis ultimately guides our investment decisions. Nevertheless, we do take broader economic conditions into consideration to manage risk and build long-term growth potential. We have limited the Fund's exposure to stocks most vulnerable to rising interest rates such as retail companies. Conversely, we also added to positions in companies that typically benefit from rising rates or are less sensitive to economic fluctuations. These include financial companies such as GOLDMAN SACHS, WASHINGTON MUTUAL, and CITIGROUP; and healthcare holdings such as PFIZER, BOSTON SCIENTIFIC, and AMGEN. Global demand for oil is growing faster than current supplies creating a rise in energy prices. Fueled by global economic growth, particularly in emerging economies such as India and China, the demand for oil will only continue to rise. Tapping new reserves and developing alternative fuel sources to increase supplies will take years to develop. Rising energy prices, however, have created value investment opportunities in oil and oil related companies. We have increased the Fund's exposure to this area of the market by adding to positions such as MARATHON OIL, CHEVRONTEXACO, and ROYAL DUTCH PETROLEUM. Q WHAT ADVICE WOULD YOU OFFER TO INVESTORS FRUSTRATED BY THE MARKET? A DON'T SWEAT THE DETAILS, FOCUS ON THE BIG PICTURE. Despite the day-to-day volatility, the overall outlook for the market and the economy remains positive. Tame inflation, low interest rates, and robust spending have set the stage for the economy and corporate profits to continue growing at a healthy rate. TAKE A LONG-TERM APPROACH. There is no easy money, particularly in a "trading range" market. While the long-term market outlook remains favorable, the market will likely remain in a trading range for the foreseeable future. Maintaining a long-term investment strategy is the best way to manage risk and achieve your investment objectives. Navigating market volatility requires greater skill and discipline. Experienced portfolio managers, however, can identify solid value investments and use market volatility to acquire positions at attractive prices. We believe we have built a portfolio of solid value investments that will add long-term value to the Fund. We will continue to monitor these investments and make adjustments as necessary to keep the Fund on track to achieve long-term growth. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Performance quoted represents past performance. Current performance may be higher or lower than the performance data quoted. Returns do not take into account the maximum 5.75% sales charge on Class A shares and would be lower if the sales charge were included. Returns represent the change in value over the stated period assuming reinvestment of dividends and capital gains at net asset value. Returns do not take into account individual taxes which may reduce actual returns when shares are sold. 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. For performance current to the most recent month-end call (800) 989-6693. 23 [CHART] PORTFOLIO HOLDINGS AS OF 06/30/05 (Based on Total Investments) EQUITIES 98.21% 1. Health Care 18.35% 2. Energy 17.61% 3. Information Technology 16.57% 4. Financials 15.29% 5. Consumer Discretionary 11.45% 6. Industrials 10.28% 7. Materials 6.03% 8. Telecommunications Services 2.63% 9. CASH AND CASH EQUIVALENTS 1.79%
24 EXPENSE EXAMPLES As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2005 through June 30, 2005. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid on your account during the period. The following transaction costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a front-end sales charge (load) of 5.75% on Class A shares; (2) a 2% redemption fee if you sell or exchange shares of the Fund within six months of purchase, with four exceptions. The fee does not apply to redemptions made under an automatic withdrawal program or periodic asset reallocation plan; redemptions to pay for expenses related to terminal illness, extended hospital or nursing home care, or other serious medical conditions; redemptions of shares acquired through dividend reinvestments; and redemptions of shares purchased before July 1, 2004; and (3) a $10 service fee on each exchange after the first five exchanges in each calendar year. The following ongoing costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a $12 low balance fee on accounts with balances of less than $250 as of September 30th of each calendar year and no investment activity (excluding reinvestment of dividends and/or capital gains) during the prior calendar year or the first nine months of the current calendar year. This fee does not apply to IRAs, qualified plan accounts, or Coverdell Education Savings Accounts; (2) a $15 annual custodial fee on IRAs, SEPs, SIMPLE IRAs, and Coverdell Education Savings Accounts; and (3) a $20 annual custodial fee on 403(b) accounts. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which in not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The following transaction costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a front-end sales charge (load) of 5.75% on Class A shares; (2) a 2% redemption fee if you sell or exchange shares of the Fund within six months of purchase, with four exceptions. The fee does not apply to redemptions made under an automatic withdrawal program or periodic asset reallocation plan; redemptions to pay for expenses related to terminal illness, extended hospital or nursing home care, or other serious medical conditions; redemptions of shares acquired through dividend reinvestments; and redemptions of shares purchased before July 1, 2004; and (3) a $10 service fee on each exchange after the first five exchanges in each calendar year. The following ongoing costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a $12 low balance fee on accounts with balances of less than $250 as of September 30th of each calendar year and no investment activity (excluding reinvestment of dividends and/or capital gains) during the prior calendar year or the first nine months of the current calendar year. This fee does not apply to IRAs, qualified plan accounts, or Coverdell Education Savings Accounts; (2) a $15 annual custodial fee on IRAs, SEPs, SIMPLE IRAs, and Coverdell Education Savings Accounts; and (3) a $20 annual custodial fee on 403(b) accounts. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 01/01/05 06/30/05 01/01/05 - 06/30/05(3) - -------------------------------------------------------------------------------------------------------- CLASS A SHARES Actual $ 1,000 $ 978.80 $ 13.69 Hypothetical (5% return before expenses) $ 1,000 $ 1,024.79 $ 14.01 CLASS C SHARES Actual $ 1,000 $ 975.70 $ 17.34 Hypothetical (5% return before expenses) $ 1,000 $ 1,024.79 $ 17.77
- ---------- (3) Expenses are equal to the Fund's annualized expense ratio of 2.79% for Class A shares and 3.54% for Class C shares, multiplied by the average account value over the period, multiplied by 181/365 days to reflect the one-half year period. 25 PACIFIC ADVISORS Small Cap Fund INVESTS PRIMARILY IN SMALL COMPANY STOCKS 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, 2005, THE FUND RETURNED - 9.27% FOR CLASS A SHARES, AND - 9.64% FOR CLASS C SHARES. THE FUND'S BENCHMARK, THE RUSSELL 2000 STOCK INDEX(1) DECLINED - 1.25% DURING THE SAME PERIOD. Q WHAT CHALLENGES DID THE MARKET PRESENT IN THE FIRST HALF OF THE YEAR? A Growth typically becomes more uneven as the economy transitions from recovery to expansion. Investors have been uncomfortable with a more unpredictable rate of economic growth. As a result, the market has responded negatively to any news which appears to threaten economic momentum. Market performance lagged through April. Unseasonably bad winter weather across the nation cast a shadow over first quarter earnings expectations. In addition, rising energy prices and short-term interest rates raised concerns about the strength of consumer and business spending. May and June eventually brought data which confirmed the underlying strength in the economy. By the end of June, an upward trend in the market began to gain traction. Despite a positive ending, the market remained in a tight "trading range" throughout the first half of the year. Volatility increased as the market reacted - and sometimes overreacted - to economic, geopolitical, and company-specific news. Higher volatility increased investment risk. Successfully navigating these rough waters required patience, discipline, and seasoned expertise. Market conditions were frustrating in the first half of the year, but they also created valuable investment opportunities. Q HOW DID THE FUND RESPOND TO MARKET VOLATILITY? A In this environment, the market reacts first and evaluates later. Negative news often results in an immediate decline for individual stocks, broader industries, or the overall market. We take a long-term approach as opposed to jumping in and out of investments in reaction to the news of the day. It is important to stay on top of the news. But, it is even more important to step back and determine how events shape the long-term outlook for the economy; the market; and, most importantly, the individual company. Following the market correction in the first quarter, we took a hard look at the Fund's portfolio. Each position was evaluated based on the long-term objectives of the Fund and the long-term prospects for each individual company. Positions in companies with the least growth potential and the longest anticipated recovery were pruned or sold. We took advantage of market volatility to add several new holdings and increase existing positions in companies with the strongest growth and most timely recovery prospects. Q HOW DID YOU DETERMINE WHICH POSITIONS TO SELL? A We looked at three factors in evaluating the positions to trim or sell. VALUE - We invest in companies with the potential to add long-term value to the Fund. We reexamined the value of the underlying companies in the portfolio. If market reaction reflected a decline in the fundamental value of a company, we pruned or sold the Fund's position. RECOVERY POTENTIAL - In many cases, we believed the stock's decline reflected an overreaction by the market. Typically, it takes time for the market to correct these excesses. In recognizing that it would take longer for some positions to recover, we consequently sold these to concentrate holdings in companies with the quickest recovery prospects. OPPORTUNITY COST - No company achieves long-term growth without encountering a few setbacks along the way. The decision on whether to ride out a period of weaker performance is made, in part, by the existence of alternative investment opportunities. We evaluated whether potential investments offered better growth potential than our current holdings. - ---------- (1) 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. Index returns assume the reinvestment of dividends, but, unlike the Fund's returns, do not reflect management fees or expenses. 26 Q WHAT NEW INVESTMENTS DID YOU MAKE DURING THE PERIOD? A The market correction gave us an opportunity to invest in several promising companies at attractive prices. For example: ENCORE WIRE CORP., the second largest manufacturer of copper wire in U.S. As a low cost producer, Encore is less susceptible to foreign competition. The company's share price is impacted by the price of copper as well as market demand. The company's earnings dropped temporarily as copper prices declined and as they made a strategic decision to cut prices to maintain and grow market share. These events caused the stock price to fall dramatically to a point at which the Company represented a good value opportunity. In addition, the market did not factor in a new product line which will add significant growth opportunities. KIRBY CORPORATION, a large barge operator which specializes in shipping petrochemicals through the Mississippi River System. We had been considering Kirby as a potential investment for the past several years. A meeting with management earlier in the year confirmed our assessment of the company's value and long-term growth potential. The market correction in the first quarter gave us an opportunity to invest in Kirby at a discounted price. GRAFTECH INTERNATIONAL, a manufacturer of carbon and graphite specialty products for a wide variety of businesses. Graftech operates in a growing industry with little competition. The growth prospects for the company and industry led us to conclude Graftech could add long-term value to the Fund. Once again, market volatility provided the opportunity to acquire a position in this company at a bargain price. Q HOW DOES SELECTING SMALL CAP STOCKS DIFFER FROM SELECTING LARGER CAP STOCKS? A Small cap stocks are covered by fewer analysts than large caps. Research information is limited and thorough investment analysis typically requires more extensive hands-on research by the portfolio manager. In many cases, this includes visiting a company and meeting with its management. A strong management team is important for a company of any size. It is one of the most important elements in assessing the long-term potential for a small company. The strength of the company's management will determine its ability to manage through short-term setbacks and achieve long-term growth My experience in senior management at major corporations, which included responsibility for the start up of new businesses, turn-around situations and mergers and acquisitions, provides a valuable base of information in evaluating the business plans of companies and their ability to execute those plans. Taking the time to become acquainted with companies is also critical in understanding how they operate within their industry. Thus, when companies experience setbacks, my business experience proves invaluable in assessing the situation and making investment decisions. Q HOW LONG WILL THIS TRADING RANGE MARKET LAST? A We believe the market will remain in a trading range for the foreseeable future. The big economic picture remains quite positive. Current data suggest the economy and corporate profits will continue to grow at a moderate rate. Moderate growth helps sustain an economic expansion for a longer period of time. As we've seen this year, it can also create a more challenging market environment. We anticipate modest performance for the overall market. The market will likely remain volatile as it responds to uneven economic data and assesses potential threats to the economy. Patience and discipline will remain paramount to achieving long-term investment objectives. We will continue to implement a disciplined investment strategy aimed at achieving long-term growth. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. Performance quoted represents past performance. Current performance may be higher or lower than the performance data quoted. Returns do not take into account the maximum 5.75% sales charge on Class A shares and would be lower if the sales charge were included. Returns represent the change in value over the stated period assuming reinvestment of dividends and capital gains at net asset value. Returns do not take into account individual taxes which may reduce actual returns when shares are sold. 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. Small cap stocks typically have fewer financial resources and may carry higher risks and experience greater volatility than large cap stocks. For performance current to the most recent month-end call (800) 989-6693. 27 [CHART] PORTFOLIO HOLDINGS AS OF 06/30/05 (Based on Total Investments) EQUITIES 100.00% 1. Industrials 39.94% 2. Energy 18.83% 3. Consumer Discretionary 11.91% 4. Financials 9.40% 5. Information Technology 7.81% 6. Materials 6.01% 7. Other Equities 6.10%
28 EXPENSE EXAMPLES As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2005 through June 30, 2005. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid on your account during the period. The following transaction costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a front-end sales charge (load) of 5.75% on Class A shares; (2) a 2% redemption fee if you sell or exchange shares of the Fund within six months of purchase, with three exceptions. The fee does not apply to redemptions made under an automatic withdrawal program or periodic asset reallocation plan; redemptions to pay for expenses related to terminal illness, extended hospital or nursing home care, or other serious medical conditions; and redemptions of shares acquired through dividend reinvestments; and (3) a $10 service fee on each exchange after the first five exchanges in each calendar year. The following ongoing costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a $12 low balance fee on accounts with balances of less than $250 as of September 30th of each calendar year and no investment activity (excluding reinvestment of dividends and/or capital gains) during the prior calendar year or the first nine months of the current calendar year. This fee does not apply to IRAs, qualified plan accounts, or Coverdell Education Savings Accounts; (2) a $15 annual custodial fee on IRAs, SEPs, SIMPLE IRAs, and Coverdell Education Savings Accounts; and (3) a $20 annual custodial fee on 403(b) accounts. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which in not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The following transaction costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a front-end sales charge (load) of 5.75% on Class A shares; (2) a 2% redemption fee if you sell or exchange shares of the Fund within six months of purchase, with three exceptions. The fee does not apply to redemptions made under an automatic withdrawal program or periodic asset reallocation plan; redemptions to pay for expenses related to terminal illness, extended hospital or nursing home care, or other serious medical conditions; and redemptions of shares acquired through dividend reinvestments; and (3) a $10 service fee on each exchange after the first five exchanges in each calendar year. The following ongoing costs are not included in the expenses shown in the table and, if applicable, would increase the expenses that you paid over the period: (1) a $12 low balance fee on accounts with balances of less than $250 as of September 30th of each calendar year and no investment activity (excluding reinvestment of dividends and/or capital gains) during the prior calendar year or the first nine months of the current calendar year. This fee does not apply to IRAs, qualified plan accounts, or Coverdell Education Savings Accounts; (2) a $15 annual custodial fee on IRAs, SEPs, SIMPLE IRAs, and Coverdell Education Savings Accounts; and (3) a $20 annual custodial fee on 403(b) accounts. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 01/01/05 06/30/05 01/01/05 - 06/30/05(3) - -------------------------------------------------------------------------------------------------------- CLASS A SHARES Actual $ 1,000 $ 907.30 $ 13.53 Hypothetical (5% return before expenses) $ 1,000 $ 1,024.79 $ 14.36 CLASS C SHARES Actual $ 1,000 $ 903.60 $ 17.04 Hypothetical (5% return before expenses) $ 1,000 $ 1,024.79 $ 18.12
- ---------- (3) Expenses are equal to the Fund's annualized expense ratio of 2.86% for Class A shares and 3.61% for Class C shares, multiplied by the average account value over the period, multiplied by 181/365 days to reflect the one-half year period. 29 PACIFIC ADVISORS GOVERNMENT SECURITIES FUND STATEMENT OF INVESTMENTS as of June 30, 2005 (Unaudited)
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS COMMON STOCK INFORMATION TECHNOLOGY SYSTEMS: SOFTWARE 5,000.000 MICROSOFT 124,200.00 1.52 TELECOMMUNICATION SERVICES INTG TELECOMM SRVCS 15,000.000 CITIZENS COMMUNICATIONS CO. 201,600.00 2.47 UTILITIES ELECTRIC UTILITIES 2,000.000 PPL CORPORATION 118,760.00 1.45 TOTAL COMMON STOCK (Cost: $428,389.80) 444,560.00 5.44 US GOVT SECURITIES US GOVERNMENT AGENCY 600,000.000 FED HOME LN MTG CORP 5.00% 12/23/11 602,863.20 7.38 250,000.000 FED HOME LN MTG CORP 5.00% 12/29/11 250,704.00 3.07 25,000.000 FED HOME LN MTG CORP 5.00% 01/17/12 25,014.67 0.31 100,000.000 FED HOME LN MTG CORP 5.25% 04/25/12 100,465.70 1.23 200,000.000 FED HOME LN MTG CORP 5.05% 04/27/12 201,325.20 2.46 150,000.000 FED HOME LN MTG CORP 5.15% 02/20/13 150,302.40 1.84 50,000.000 FED HOME LN MTG CORP 5.20% 05/09/13 50,082.70 0.61 135,000.000 FED HOME LN MTG CORP 5.125% 05/13/13 135,235.17 1.65 250,000.000 FED HOME LN MTG CORP 5.00% 05/29/13 250,312.50 3.06 100,000.000 FED HOME LN MTG CORP 5.45% 08/09/13 100,187.00 1.23 100,000.000 FED HOME LN MTG CORP 5.33% 09/03/13 100,282.50 1.23 50,000.000 FED HOME LN MTG CORP 5.25% 02/18/14 50,008.95 0.61 225,000.000 FED HOME LN MTG CORP 5.125% 03/10/14 225,458.33 2.76 100,000.000 FED HOME LN MTG CORP 5.625% 08/12/14 100,224.10 1.23 250,000.000 FED HOME LN MTG CORP 5.50% 09/22/14 250,052.25 3.06 218,000.000 FED HOME LN MTG CORP 5.25% 12/01/14 217,593.65 2.66 50,000.000 FED HOME LN MTG CORP 5.50% 12/30/14 50,010.75 0.61 65,000.000 FED HOME LN MTG CORP 5.35% 01/27/15 65,506.35 0.80 45,000.000 FED HOME LN MTG CORP 5.35% 02/05/15 45,061.96 0.55 50,000.000 FED HOME LN MTG CORP 5.50% 01/28/16 50,010.25 0.61 50,000.000 FED HOME LOAN BANK 4.55% 06/30/08 50,000.00 0.61 70,000.000 FED HOME LOAN BANK 4.30% 05/05/09 69,971.79 0.86 37,500.000 FED HOME LOAN BANK 4.55% 05/26/09 37,504.58 0.46 50,000.000 FED HOME LOAN BANK 4.32% 08/27/09 49,981.90 0.61 100,000.000 FED HOME LOAN BANK 5.17% 04/21/10 100,412.50 1.23 50,000.000 FED HOME LOAN BANK 5.375% 07/01/11 50,000.00 0.61 215,000.000 FED HOME LOAN BANK 5.35% 05/09/12 215,371.52 2.64 180,000.000 FED HOME LOAN BANK 5.09% 10/22/12 180,029.34 2.20 100,000.000 FED HOME LOAN BANK 5.00% 12/03/12 100,167.90 1.23 44,912.281 FED HOME LOAN BANK 5.24% 12/17/12 44,920.51 0.55
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 30
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS US GOVT SECURITIES CONTINUED 536,363.640 FED HOME LOAN BANK 5.35% 12/24/12 536,468.78 6.56 100,000.000 FED HOME LOAN BANK 5.30% 12/03/13 100,015.70 1.22 100,000.000 FEDERAL NATL MTG ASSOC. 5.00% 03/30/10 100,913.30 1.23 100,000.000 FEDERAL NATL MTG ASSOC. 5.00% 10/20/11 100,326.50 1.23 30,000.000 FEDERAL NATL MTG ASSOC. 5.625% 02/28/12 30,744.54 0.38 50,000.000 FEDERAL NATL MTG ASSOC. 5.00% 03/23/12 50,120.80 0.61 75,000.000 FEDERAL NATL MTG ASSOC. 5.50% 07/18/12 75,073.95 0.92 48,000.000 FEDERAL NATL MTG ASSOC. 4.00% 08/23/12 48,023.52 0.59 200,000.000 FEDERAL NATL MTG ASSOC. 5.00% 08/24/12 200,272.20 2.45 300,000.000 FEDERAL NATL MTG ASSOC. 5.25% 12/26/12 302,085.60 3.70 50,000.000 FEDERAL NATL MTG ASSOC. 5.25% 01/28/13 50,059.00 0.61 75,000.000 FEDERAL NATL MTG ASSOC. 5.00% 02/27/13 74,982.30 0.92 50,000.000 FEDERAL NATL MTG ASSOC. 5.125% 02/27/13 50,093.45 0.61 100,000.000 FEDERAL NATL MTG ASSOC. 5.50% 10/15/13 100,052.00 1.22 300,000.000 FEDERAL NATL MTG ASSOC. 5.25% 01/21/14 300,100.20 3.67 100,000.000 FEDERAL NATL MTG ASSOC. 5.25% 02/13/14 99,709.20 1.22 150,000.000 FEDERAL NATL MTG ASSOC. 5.50% 06/09/15 150,146.70 1.84 112,000.000 FEDERAL NATL MTG ASSOC. 5.75% 11/07/17 112,732.14 1.38 535,000.000 FEDERAL NATL MTG ASSOC. 5.25% 01/28/13 535,631.30 6.55 TOTAL US GOVT SECURITIES (Cost: $6,927,695.27) 6,936,612.85 84.87 PREFERRED STOCK FINANCIALS CONSUMER FINANCE 2,000.000 HSBC FINANCE CORP. 6.36% PFD 50,000.00 0.61 DIVERSIFIED BANKS 5,000.000 ROYAL BK OF SCOTLAND 6.35% PFD N 126,850.00 1.55 LIFE/HEALTH INSUR 5,000.000 METLIFE INC. 6.50% PFD 125,900.00 1.54 REGIONAL BANKS 7,600.000 FIRST BANCORP PUERTO RICO 7.40% PFD C 197,600.00 2.42 TOTAL PREFERRED STOCK (Cost: $501,017.00) 500,350.00 6.12 SHORT TERM INVESTMENTS MONEY MARKET 113,800.65 UMB MONEY MARKET FIDUCIARY 113,800.65 1.39 TOTAL SHORT TERM INVESTMENTS (Cost: $113,800.65) 113,800.65 1.39 TOTAL INVESTMENTS (COST: $7,970,902.72) 7,995,323.50 97.82 OTHER ASSETS LESS LIABILITIES 177,916.77 2.18 TOTAL NET ASSETS 8,173,240.27 100.00
* Non-income producing. ** The principal amount is stated in U.S. dollars unless otherwise indicated. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 31 PACIFIC ADVISORS INCOME AND EQUITY FUND STATEMENT OF INVESTMENTS as of June 30, 2005 (Unaudited)
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS COMMON STOCK CONSUMER DISCRETIONARY DISTRIBUTORS 2,000.000 GENUINE PARTS CO 82,180.00 0.69 HOME IMPROVEMENT 1,000.000 HOME DEPOT, INC. 38,900.00 0.33 ENERGY INTEGRATED OIL & GAS 1,000.000 BRITISH PETROLEUM 62,380.00 0.52 1,000.000 MARATHON OIL CORP 53,370.00 0.45 OIL&GAS REF/MKT/TRAN 1,000.000 EL PASO ENERGY CORPORATION 11,520.00 0.10 OIL & GAS EXPLR/PROD 1,000.000 BURLINGTON RESOURCES INC. 55,240.00 0.46 FINANCIALS DIVERSIFIED BANKS 2,000.000 BANK OF AMERICA 91,220.00 0.77 2,000.000 WACHOVIA CORP 99,200.00 0.83 MULTI LINE INSURANCE 1,000.000 AMERICAN INT'L GROUP INC. 58,100.00 0.49 PROPERTY & CAS INSUR 500.000 CHUBB CORP. 42,805.00 0.36 REAL ESTATE INV TRST 11,500.000 HOSPITALITY PROPERTIES 506,805.00 4.26 REGIONAL BANKS 1,000.000 WILMINGTON TRUST CO 36,010.00 0.30 THRIFTS&MTG FINANCE 2,000.000 WASHINGTON MUTUAL 81,380.00 0.68 HEALTH CARE PHARMACEUTICALS 3,000.000 JOHNSON & JOHNSON 195,000.00 1.64 2,500.000 PFIZER INC. 68,950.00 0.58 INDUSTRIALS AEROSPACE & DEFENSE 2,000.000 HONEYWELL INTERNATIONAL INC. 73,260.00 0.62 INDUSTRIAL CONGLOMER 5,000.000 GENERAL ELECTRIC 173,250.00 1.46 2,000.000 TYCO INTERNATIONAL LTD. 58,400.00 0.49
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 32
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS COMMON STOCK CONTINUED INFORMATION TECHNOLOGY SYSTEMS: SOFTWARE 5,000.000 MICROSOFT 124,200.00 1.04 MATERIALS ALUMINUM 1,000.000 ALCOA INC. 26,130.00 0.22 DIVERSIFIED CHEMICAL 1,000.000 E.I. DUPONT DE NEMOURS & CO. 43,010.00 0.36 DIVERSIFD METAL/MNG 1,000.000 FREEPORT MCMORAN 37,440.00 0.31 1,000.000 PHELPS DODGE CORP. 92,500.00 0.78 GOLD 1,000.000 ANGLOGOLD LTD 35,730.00 0.30 SPECIALTY CHEMICALS 2,000.000 INTL. FLAVORS AND FRAGRANCES 72,440.00 0.61 PAPER PRODUCTS 1,000.000 INTERNATIONAL PAPER 30,210.00 0.25 TELECOMMUNICATION SERVICES INTG TELECOMM SRVCS 15,000.000 CITIZENS COMMUNICATIONS CO. 201,600.00 1.70 1,000.000 SBC COMMUNICATIONS 23,750.00 0.20 UTILITIES MULTI UTILITIES/POWR 1,000.000 DOMINION RESOURCES 73,390.00 0.62 1,000.000 DUKE ENERGY CORP. 29,730.00 0.25 1,000.000 PUBLIC SERVICE ENTERPRISE GROUP INC 60,820.00 0.51 TOTAL COMMON STOCK (Cost: $2,523,689.00) 2,638,920.00 22.18 CORPORATE BONDS CONSUMER DISCRETIONARY BROADCAST & CABLE TV 519,000.000 LIBERTY MEDIA CORP 7.75% 07/15/09 551,572.96 4.64 GENL MERCHANDISE STR 435,000.000 DAYTON HUDSON CO. 8.60% 01/15/12 536,888.75 4.52 HOTELS, RESORTS 160,000.000 MARRIOTT CORP 9.375% 06/15/07 171,063.52 1.44
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 33
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS CORPORATE BONDS CONTINUED CONSUMER STAPLES BREWERS 188,000.000 ANHEUSER-BUSCH 7.25% 09/15/15 195,670.02 1.64 165,000.000 ANHEUSER-BUSCH 7.125% 07/01/17 178,002.50 1.50 HYPERMKTS/SUPER CTRS 50,000.000 WAL-MART STORES 8.00% 09/15/06 52,194.55 0.44 PACKAGED FOODS/MEATS 323,000.000 GERBER PRODUCTS 9.00% 10/15/06 339,749.49 2.86 ENERGY INTEGRATED OIL & GAS 361,000.000 OCCIDENTAL PETROLEUM 10.125% 09/15/09 436,029.88 3.67 170,000.000 TEXACO CAPITAL 8.625% 06/30/10 204,268.26 1.72 FINANCIALS CONSUMER FINANCE 150,000.000 GENL MOTORS ACCEPT CORP 6.125% 09/15/06 150,107.40 1.26 DIVERSIFIED FINANCL 371,000.000 GENERAL ELECTRIC CAP 8.125% 05/15/12 447,871.94 3.77 50,000.000 GENERAL ELECTRIC CAP 8.875% 05/15/09 57,898.90 0.49 LIFE/HEALTH INSUR 85,000.000 TRANSAMERICA CORP. 9.375% 03/01/08 95,263.07 0.80 MULTI LINE INSURANCE 100,000.000 AMERICAN GENERAL FIN 5.875% 12/15/05 100,908.20 0.85 SPECIALIZED FINANCE 118,000.000 ASSOCIATES CORP NA 7.35% 05/15/06 121,342.11 1.02 INDUSTRIALS CONSTRUCTION & MACH 331,000.000 DEERE & COMPANY 8.95% 06/15/19 384,356.87 3.23 RAILROADS & TRUCKING 135,000.000 NORFOLK SOUTHERN CORP. 7.40% 09/15/06 140,357.20 1.18 MATERIALS DIVERSIFIED CHEMICAL 25,000.000 DOW CHEMICAL CO. 5.60% 11/15/09 25,516.65 0.21 TELECOMMUNICATION SERVICES INTG TELECOMM SRVCS 85,000.000 BELLSOUTH CAP 6.04% 11/15/26 92,417.53 0.78 445,110.790 BELLSOUTH TELECOMMUNICATION 6.30% 12/15/15 475,906.24 4.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 34
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS CORPORATE BONDS CONTINUED 35,000.000 SBC COMMUNICATIONS 6.59% 09/29/08 37,181.69 0.31 135,000.000 SBC COMMUNICATIONS 7.39% 05/24/10 150,141.33 1.26 50,000.000 WISCONSIN BELL 6.35% 12/01/26 54,910.85 0.46 UTILITIES ELECTRIC UTILITIES 255,000.000 COMMMONWEALTH EDISON 8.00% 05/15/08 280,693.29 2.36 GAS UTILITIES 150,000.000 PIEDMONT NATURAL GAS 7.80% 09/29/10 172,704.15 1.45 MULTI UTILITIES/POWR 125,000.000 NORTHWESTERN CORP 7.10% 08/01/05 125,236.88 1.05 75,000.000 PENN POWER & LT 6.55% 03/01/06 76,270.66 0.64 15,000.000 POTOMAC ELEC. POWER 6.50% 09/15/05 15,078.19 0.13 94,000.000 POTOMAC ELEC. POWER 5.875% 10/15/08 98,126.22 0.83 375,000.000 PUB SVC ELEC & GAS 6.75% 03/01/06 381,831.38 3.21 128,000.000 PUB SVC ELEC & GAS 6.25% 01/01/07 131,955.58 1.11 TOTAL CORPORATE BOND (Cost: $6,338,553.67) 6,281,516.26 52.83 CONVERTIBLE CORPORATE BONDS FINANCIALS DIVERSIFIED BANKS 25,000.000 ABN AMRO BANK NV CNV 11.50% 10/14/05 23,150.00 0.20 64,000.000 ABN AMRO BANK NV CNV 9.25% 12/09/05 56,256.00 0.47 9,000.000 SG STRUCTURED CNV 8.00% 11/23/05 8,964.00 0.08 24,000.000 SG STRUCTURED CNV 10.00% 12/22/05 24,196.80 0.20 125,000.000 BARCLAYS BANK PLC CNV 7.00% 06/22/06 125,000.00 1.05 TOTAL CONVERTIBLE CORPORATE BONDS (Cost: $244,765.60) 237,566.80 2.00 US GOVT SECURITIES US GOVERNMENT AGENCY 100,000.000 FED HOME LN MTG CORP 4.125% 09/01/09 99,547.00 0.84 200,000.000 FED HOME LN MTG CORP 5.00% 12/23/11 200,954.40 1.69 50,000.000 FED HOME LN MTG CORP 5.00% 09/10/12 50,007.55 0.42 150,000.000 FED HOME LN MTG CORP 5.125% 08/06/13 150,211.80 1.26 33,000.000 FED HOME LN MTG CORP 5.125% 03/10/14 33,067.22 0.28 250,000.000 FED HOME LN MTG CORP 5.50% 09/22/14 250,052.25 2.10 300,000.000 FED HOME LOAN BANK 4.46% 10/28/09 300,167.70 2.53 40,000.000 FED HOME LOAN BANK 4.32% 08/27/09 39,985.52 0.34 230,000.000 FED HOME LOAN BANK 5.05% 02/14/13 230,384.79 1.94 41,000.000 FEDERAL NATL MTG ASSOC. 5.00% 10/05/10 41,006.77 0.35 100,000.000 FEDERAL NATL MTG ASSOC. 5.01% 11/10/10 100,137.30 0.84 100,000.000 FEDERAL NATL MTG ASSOC. 5.00% 10/20/11 100,326.50 0.84 100,000.000 FEDERAL NATL MTG ASSOC. 5.00% 01/27/12 100,033.10 0.84
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 35
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS US GOVT SECURITIES CONTINUED 100,000.000 FEDERAL NATL MTG ASSOC. 5.00% 03/23/12 100,241.60 0.84 75,000.000 FEDERAL NATL MTG ASSOC. 5.00% 03/11/13 75,105.00 0.63 TOTAL US GOVT SECURITIES (Cost: $1,867,899.22) 1,871,228.50 15.74 PREFERRED STOCK FINANCIALS CONSUMER FINANCE 2,000.000 HSBC FINANCE CORP. 6.36% PFD 50,000.00 0.42 REGIONAL BANKS 10,000.000 FIRST BANCORP PUERTO RICO 7.40% PFD C 260,000.00 2.19 LIFE/HEALTH INSUR 3,000.000 METLIFE INC. 6.50% PFD 75,540.00 0.63 3,500.000 PHOENIX COMPANIES INC. 7.45% 01/15/32 PFD 90,125.00 0.76 REAL ESTATE INV TRST 3,700.000 PRICE LEGACY CORP. 6.82% PFD A 54,575.00 0.46 TOTAL PREFERRED STOCK (Cost: $537,988.00) 530,240.00 4.46 SHORT TERM INVESTMENTS MONEY MARKET 236,748.30 UMB MONEY MARKET FIDUCIARY 180,491.84 1.52 TOTAL SHORT TERM INVESTMENTS (Cost: $180,491.84) 180,491.84 1.52 TOTAL INVESTMENTS (COST: $11,693,387.33) 11,739,963.40 98.73 OTHER ASSETS LESS LIABILITIES 150,670.97 1.27 TOTAL NET ASSETS 11,890,634.37 100.00
* Non-income producing. ** The principal amount is stated in U.S. dollars unless otherwise indicated. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 36 PACIFIC ADVISORS BALANCED FUND STATEMENT OF INVESTMENTS as of June 30, 2005 (Unaudited)
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS COMMON STOCK CONSUMER DISCRETIONARY ADVERTISING 40,000.000 INTERPUBLIC GROUP* 487,200.00 1.33 BROADCAST & CABLE TV 7,200.000 LIBERTY GLOBAL* 336,024.00 0.92 MOVIES/ENTERTAINMENT 10,000.000 DISNEY 251,800.00 0.69 18,000.000 TIME WARNER* 300,780.00 0.82 7,500.000 VIACOM INC 240,150.00 0.66 SPECIALTY STORES 10,000.000 HOT TOPIC INC* 191,200.00 0.52 10,000.000 MICHAELS STORES INC 413,700.00 1.13 CONSUMER STAPLES SOFT DRINKS 9,000.000 CADBURY SCHWEPPES 344,970.00 0.94 12,000.000 COCA-COLA 501,000.00 1.37 ENERGY INTEGRATED OIL & GAS 12,000.000 BRITISH PETROLEUM 748,560.00 2.05 6,000.000 CONOCOPHILLIPS 344,940.00 0.94 OIL & GAS EQUIP/SERV 6,000.000 COOPER CAMERON* 372,300.00 1.02 OIL & GAS EXPLR/PROD 20,000.000 DEVON ENERGY CORP. 1,013,600.00 2.77 15,000.000 SUNCOR ENERGY INC 709,800.00 1.94 OIL&GAS REF/MKT/TRAN 30,000.000 WILLIAMS COMPANIES INC. 570,000.00 1.56 FINANCIALS DIVERSIFIED BANKS 35,000.000 BANCO LATINAMERICANO DE EXPORTACIONES 628,250.00 1.72 INSURANCE BROKERS 6,000.000 MARSH & MCLENNAN 166,200.00 0.46 LIFE/HEALTH INSUR 7,500.000 METLIFE, INC. 337,050.00 0.92 MULTI LINE INSURANCE 5.000 BERKSHIRE HATHAWAY INC - CL A* 417,500.00 1.14
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 37
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS COMMON STOCK CONTINUED PROPERTY & CAS INSUR 4,000.000 CHUBB CORP. 342,440.00 0.94 REAL ESTATE INV TRST 13,946.000 CATELLUS 457,428.80 1.25 SPECIALIZED FINANCE 10,000.000 MOODYS CORPORATION 449,600.00 1.23 THRIFTS&MTG FINANCE 6,000.000 FED HOME LN MTG ASSOC. 391,380.00 1.07 7,500.000 WASHINGTON MUTUAL 305,175.00 0.83 HEALTH CARE BIOTECHNOLOGY 16,000.000 CAMBREX CORP 304,800.00 0.83 HEALTH CARE EQUIP 12,000.000 PERKIN ELMER 226,800.00 0.62 HEALTH CARE SERVICES 20,000.000 INVERNESS MEDICAL INNOVATIONS INC* 546,000.00 1.49 PHARMACEUTICALS 15,000.000 BRISTOL-MYERS SQUIBB CO 374,700.00 1.02 5,000.000 JOHNSON & JOHNSON 325,000.00 0.89 15,000.000 MYLAN LABORATIORIES INC 288,600.00 0.79 25,000.000 PFIZER INC. 689,500.00 1.89 10,000.000 PHARMACEUTICAL RESOURCES INC.* 318,100.00 0.87 8,000.000 WYETH 356,000.00 0.97 INDUSTRIALS AEROSPACE & DEFENSE 7,500.000 BOEING COMPANY 495,000.00 1.35 15,000.000 CUBIC CORP 266,100.00 0.73 COMMERCIAL PRINTING 5,000.000 R H DONNELLEY CORP* 309,900.00 0.85 DIVERSIFIED COML SRV 15,000.000 GATX CORPORATION 517,500.00 1.41 8,000.000 H & R BLOCK 466,800.00 1.28 INDUSTRIAL CONGLOMER 15,000.000 GENERAL ELECTRIC 519,750.00 1.42 15,000.000 TYCO INTERNATIONAL LTD. 438,000.00 1.20 INDUSTRIAL MACHINERY 10,000.000 SPX CORP. 459,800.00 1.26
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 38
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS COMMON STOCK CONTINUED INFORMATION TECHNOLOGY APPLICATION SOFTWARE 10,000.000 REYNOLDS & REYNOLDS 270,300.00 0.74 COMMUNICATIONS EQUIP 60,316.000 LUCENT TECHNOLOGIES* 175,519.56 0.48 30,000.000 NOKIA CORP - ADR A 499,200.00 1.36 COMPUTER STORAGE/PER 15,000.000 SANDISK CORP.* 355,950.00 0.97 DATA PROCESSING SRV 6,000.000 AUTOMATIC DATA PROCESSING 251,820.00 0.69 SYSTEMS: SOFTWARE 15,000.000 MICROSOFT 372,600.00 1.02 MATERIALS DIVERSIFD METAL/MNG 4,000.000 RIO TINTO PLC 487,680.00 1.33 FOREST PRODUCTS 10,683.000 RAYONIER INC. 566,519.49 1.55 SPECIALTY CHEMICALS 10,000.000 CABOT MICRO ELECTRONICS INC.* 289,900.00 0.79 25,000.000 GRAFTECH INTL. LTD* 107,500.00 0.30 STEEL 8,000.000 RELIANCE STEEL 296,560.00 0.81 TELECOMMUNICATION SERVICES INTG TELECOMM SRVCS 30,000.000 LIBERTY MEDIA GROUP CLASS A* 305,700.00 0.84 UTILITIES ELECTRIC UTILITIES 10,000.000 ALLETE INC. 499,000.00 1.36 MULTI UTILITIES/POWR 17,500.000 DUKE ENERGY CORP. 520,275.00 1.42 TOTAL COMMON STOCK (Cost: $15,908,501.16) 22,221,921.85 60.75
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 39
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS CORPORATE BONDS CONSUMER DISCRETIONARY AUTO PARTS & EQUIP 100,000.000 BORG WARNER 8.00% 10/01/19 121,657.00 0.33 130,000.000 DANA CORP. 6.50% 03/01/09 127,578.10 0.35 HOME FURNISHINGS 110,000.000 WHIRLPOOL CORP 9.10% 02/01/08 121,421.85 0.33 CONSUMER STAPLES BREWERS 620,000.000 ANHEUSER-BUSCH 7.25% 09/15/15 645,294.76 1.76 DISTILLERS & VINTNER 310,000.000 SEAGRAMS & SONS 7.00% 04/15/08 321,049.95 0.88 FOOD : RETAIL 197,000.000 SAFEWAY INC 9.30% 02/01/07 209,967.92 0.57 200,000.000 SAFEWAY INC. 7.00% 09/15/07 210,177.60 0.58 PACKAGED FOODS/MEATS 794,000.000 GERBER PRODUCTS 9.00% 10/15/06 835,173.66 2.28 ENERGY INTEGRATED OIL & GAS 501,000.000 ATLANTIC RICHFIELD 9.125% 03/01/11 619,793.11 1.69 541,000.000 ENRON OIL & GAS 6.00% 12/15/08 565,016.07 1.54 604,000.000 OCCIDENTAL PETROLEUM 10.125% 09/15/09 729,534.76 1.99 199,000.000 PHILLIPS PETE 7.125% 03/15/28 216,064.85 0.59 OIL & GAS EXPLR/PROD 124,000.000 DEVON ENERGY CORP. 10.125% 11/15/09 150,110.31 0.41 OIL&GAS REF/MKT/TRAN 325,000.000 KINDER MORGAN 6.50% 09/01/13 346,433.75 0.95 FINANCIALS CONSUMER FINANCE 250,000.000 GENL MOTORS ACCEPT CORP 5.00% 08/15/05 249,823.50 0.68 500,000.000 GENL MOTORS ACCEPT CORP 6.75% 01/15/06 503,945.00 1.38 611,000.000 GENL MOTORS ACCEPT CORP 8.75% 07/15/05 611,447.25 1.67 DIVERSIFIED FINANCL 269,000.000 GENERAL ELECTRIC CAP 8.125% 05/15/12 324,737.34 0.89 LIFE/HEALTH INSUR 435,000.000 OLD REPUBLIC INTL 7.00% 06/15/07 456,088.80 1.25 325,000.000 TRANSAMERICA CORP. 9.375% 03/01/08 364,241.15 1.00
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 40
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS CORPORATE BONDS CONTINUED SPECIALIZED FINANCE 155,000.000 BENEFICIAL CORP. 8.40% 05/15/08 171,679.55 0.47 HEALTH CARE HEALTH CARE EQUIP 380,000.000 MALLINCKRODT 6.50% 11/15/07 396,777.00 1.08 HEALTH CARE SUPPLIES 368,000.000 BAUSCH & LOMB 7.125% 08/01/28 413,365.94 1.13 MANAGED HEALTH CARE 100,000.000 CIGNA CORP. 7.40% 05/15/07 105,482.30 0.29 INDUSTRIALS CONSTRUCTION & MACH 336,000.000 DEERE & COMPANY 8.95% 06/15/19 390,162.86 1.07 TELECOMMUNICATION SERVICES INTG TELECOMM SRVCS 255,000.000 AT&T CORP 8.35% 01/15/25 263,287.50 0.72 505,042.500 BELLSOUTH TELECOMMUN 6.30% 12/15/15 539,984.38 1.48 305,000.000 GTE HAWAIIAN TEL 7.00% 02/01/06 308,050.00 0.84 400,000.000 GTE SOUTH INC. 6.00% 02/15/08 413,217.20 1.13 100,000.000 GTE SOUTH INC. 6.125% 06/15/07 103,145.30 0.28 135,000.000 NEW ENGLAND TEL&TEL 6.875% 10/01/23 137,886.70 0.38 UTILITIES MULTI UTILITIES/POWR 200,000.000 FLORIDA PWR & LT 6.00% 06/01/08 210,190.20 0.57 476,000.000 NIAGARA MOHAWK POWER 9.75% 11/01/05 484,829.32 1.33 250,000.000 NORTHWESTERN CORP 7.00% 08/15/23 255,000.00 0.70 325,000.000 NORTHWESTERN CORP 7.10% 08/01/05 325,615.88 0.89 150,000.000 POTOMAC ELEC. POWER 6.25% 10/15/07 156,544.20 0.43 155,000.000 POTOMAC ELEC. POWER 5.875% 10/15/08 161,803.88 0.44 49,280.879 RELIANT ENER MID ATL 9.237% 07/02/17 55,440.99 0.15 TOTAL CORPORATE BOND (Cost: $12,585,536.04) 12,622,019.93 34.50 US GOVT SECURITIES US GOVERNMENT AGENCY 200,000.000 FED HOME LOAN BANK 4.46% 10/28/09 200,111.80 0.55 TOTAL US GOVT SECURITIES (Cost: $200,000.00) 200,111.80 0.55
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 41
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS SHORT TERM INVESTMENTS MONEY MARKET 1,361,541.34 UMB MONEY MARKET FIDUCIARY 1,361,541.34 3.72 TOTAL SHORT TERM INVESTMENTS (Cost: $1,361,541.34) 1,361,541.34 3.72 TOTAL INVESTMENTS (COST: $30,055,578.54) 36,405,594.92 99.52 OTHER ASSETS LESS LIABILITIES 177,359.72 0.48 TOTAL NET ASSETS 36,582,954.64 100.00
* Non-income producing. ** The principal amount is stated in U.S. dollars unless otherwise indicated. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 42 PACIFIC ADVISORS GROWTH FUND STATEMENT OF INVESTMENTS as of June 30, 2005 (Unaudited)
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS COMMON STOCK CONSUMER DISCRETIONARY HOME IMPROVEMENT 500.000 HOME DEPOT, INC. 19,450.00 0.78 RESTAURANTS 1,125.000 APPLEBEE'S INTL 29,801.25 1.20 SPECIALTY STORES 1,000.000 LINENS ' N THINGS INC.* 23,660.00 0.95 ENERGY INTEGRATED OIL & GAS 1,000.000 EXXON MOBIL CORP. 57,470.00 2.31 1,000.000 MARATHON OIL CORP 53,370.00 2.15 OIL & GAS EQUIP/SERV 1,000.000 CARBO CERAMICS INC. 78,960.00 3.18 5,000.000 MITCHAM INDUSTRIES INC.* 42,750.00 1.72 1,000.000 BAKER HUGHES INC. 51,160.00 2.06 OIL & GAS EXPLR/PROD 1,000.000 APACHE CORPORATION 64,600.00 2.60 1,000.000 BURLINGTON RESOURCES INC. 55,240.00 2.22 1,000.000 XTO ENERGY INC. 33,990.00 1.37 FINANCIALS DIVERSIFIED BANKS 161.000 HSBC HOLDING PLC 12,823.65 0.52 THRIFTS&MTG FINANCE 2,000.000 SOVEREIGN BANCORP INC 44,680.00 1.80 HEALTH CARE BIOTECHNOLOGY 500.000 CAMBREX CORP 9,525.00 0.38 HEALTH CARE EQUIP 500.000 BECTON DICKINSON 26,235.00 1.06 2,000.000 ST. JUDE MEDICAL INC* 87,220.00 3.51 1,000.000 ZIMMER HOLDINGS INC.* 76,170.00 3.07 HEALTH CARE SERVICES 1,935.000 CAREMARK RX INC.* 86,146.20 3.47 600.000 QUEST DIAGNOSTICS, INC. 31,962.00 1.29 MANAGED HEALTH CARE 3,000.000 AMERICA SVC GROUP* 47,550.00 1.92 1,000.000 WELLPOINT* 69,640.00 2.80
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 43
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS COMMON STOCK CONTINUED PHARMACEUTICALS 1,200.000 JOHNSON & JOHNSON 78,000.00 3.14 3,100.000 NATURE'S SUNSHINE 54,064.00 2.18 1,200.000 PFIZER INC. 33,096.00 1.33 INDUSTRIALS BUILDING PRODUCTS 2,000.000 ELKCORP 57,100.00 2.30 INDUSTRIAL CONGLOMER 2,000.000 GENERAL ELECTRIC 69,300.00 2.79 1,000.000 TYCO INTERNATIONAL LTD. 29,200.00 1.18 INDUSTRIAL MACHINERY 300.000 ITT INDUSTRIES 29,289.00 1.18 INFORMATION TECHNOLOGY APPLICATION SOFTWARE 2,000.000 INTERVOICE INC* 17,260.00 0.69 COMMUNICATIONS EQUIP 1,000.000 ANDREW CORP.* 12,760.00 0.51 1,000.000 QUALCOMM INC. 33,010.00 1.33 COMPUTER HARDWARE 200.000 INTERNATIONAL BUSINE MACHINES CORP. 14,840.00 0.60 SYSTEMS: SOFTWARE 2,000.000 MICROSOFT 49,680.00 2.00 2,000.000 ORACLE CORPORATION* 26,400.00 1.06 MATERIALS DIVERSIFD METAL/MNG 500.000 FREEPORT MCMORAN 18,720.00 0.75 500.000 PHELPS DODGE CORP. 46,250.00 1.86 FOREST PRODUCTS 3,000.000 LOUISIANA PACIFIC CORP. 73,740.00 2.97 GOLD 1,000.000 ANGLOGOLD LTD 35,730.00 1.44 PAPER PRODUCTS 1,000.000 GEORGIA PACIFIC CORP 31,800.00 1.28 SPECIALTY CHEMICALS 2,000.000 LYONDELL CHEMICAL CO 52,840.00 2.13 STEEL 2,000.000 COMMERCIAL METALS CO 47,640.00 1.92 500.000 US STEEL 17,185.00 0.69
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 44
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS COMMON STOCK CONTINUED TELECOMMUNICATION SERVICES INTG TELECOMM SRVCS 5,000.000 CITIZENS COMMUNICATIONS CO. 67,200.00 2.71 TOTAL COMMON STOCK (Cost: $1,647,684.61) 1,897,507.10 76.40 SHORT TERM INVESTMENTS MONEY MARKET 707,100.80 UMB MONEY MARKET FIDUCIARY 720,206.29 29.00 TOTAL SHORT TERM INVESTMENTS (Cost: $720,206.29) 720,206.29 29.00 TOTAL INVESTMENTS (COST: $2,367,890.90) 2,617,713.39 105.40 OTHER ASSETS LESS LIABILITIES (134,171.96) (5.40) TOTAL NET ASSETS 2,483,541.43 100.00
* Non-income producing. ** The principal amount is stated in U.S. dollars unless otherwise indicated. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 45 PACIFIC ADVISORS MULTI-CAP VALUE FUND STATEMENT OF INVESTMENTS as of June 30, 2005 (Unaudited)
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS COMMON STOCK CONSUMER DISCRETIONARY GENL MERCHANDISE STR 4,500.000 TARGET CORP 244,845.00 2.73 HOME IMPROVEMENT 6,000.000 HOME DEPOT, INC. 233,400.00 2.60 LEISURE PRODUCTS 20,000.000 CALLAWAY GOLF COMPANY 308,600.00 3.44 MOVIES/ENTERTAINMENT 15,000.000 ACTIVISION INC.* 247,800.00 2.76 ENERGY INTEGRATED OIL & GAS 6,000.000 CHEVRONTEXACO CORP 335,520.00 3.74 6,000.000 MARATHON OIL CORP 320,220.00 3.57 3,000.000 ROYAL DUTCH PETROLEUM COMPANY 194,700.00 2.17 9,000.000 WILLIAMS COMPANIES INC. 171,000.00 1.91 OIL & GAS EQUIP/SERV 40,000.000 MITCHAM INDUSTRIES INC.* 342,000.00 3.81 OIL & GAS EXPLR/PROD 3,500.000 APACHE CORPORATION 226,100.00 2.52 FINANCIALS DIVERSIFIED FINANCL 5,000.000 CITIGROUP INC 231,150.00 2.58 5,000.000 J.P. MORGAN 176,600.00 1.97 FINANCIAL SERVICES 7,000.000 MBNA CORP. 183,120.00 2.04 INVESTMENT BANK/BRKG 2,500.000 GOLDMAN SACHS GROUP INC 255,050.00 2.84 MULTI LINE INSURANCE 5,000.000 AMERICAN INT'L GROUP INC. 290,500.00 3.24 THRIFTS&MTG FINANCE 6,000.000 WASHINGTON MUTUAL 244,140.00 2.72 HEALTH CARE BIOTECHNOLOGY 4,200.000 AMGEN INC.* 253,932.00 2.83 6,500.000 BIOGEN IDEC* 223,925.00 2.50 HEALTH CARE EQUIP 9,000.000 BOSTON SCIENTIFIC CO* 243,000.00 2.71
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 46
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS COMMON STOCK CONTINUED HEALTH CARE SUPPLIES 8,000.000 SERLOGICALS CORP.* 170,000.00 1.90 PHARMACEUTICALS 10,000.000 ENDO PHARMACEUTICALS* 262,800.00 2.93 10,000.000 PFIZER INC. 275,800.00 3.08 12,000.000 SCHERING-PLOUGH CORP 228,720.00 2.55 INDUSTRIALS AEROSPACE & DEFENSE 5,000.000 HONEYWELL INTERNATIONAL INC. 183,150.00 2.04 AIR FREIGHT/SHIPPING 13,000.000 MARITRANS INC. 351,650.00 3.92 BUILDING PRODUCTS 5,000.000 ELKCORP 142,750.00 1.59 ELECTRICAL COMPON/EQ 20,000.000 METROLOGIC INSTRUMTS* 250,800.00 2.80 INFORMATION TECHNOLOGY COMPUTER STORAGE/PER 15,000.000 EMC CORPORATION* 205,650.00 2.29 COMMUNICATIONS EQUIP 15,000.000 CISCO SYSTEMS INC.* 286,650.00 3.20 100,000.000 LUCENT TECHNOLOGIES* 291,000.00 3.25 COMPUTER HARDWARE 3,750.000 INTERNATIONAL BUSINE MACHINES CORP. 278,250.00 3.10 SEMICONDUCTORS 10,000.000 INTEL CORPORATION 260,600.00 2.91 SYSTEMS: SOFTWARE 7,000.000 MICROSOFT 173,880.00 1.94 MATERIALS SPECIALTY CHEMICALS 70,000.000 GRAFTECH INTL. LTD* 301,000.00 3.36 STEEL 7,100.000 US STEEL 244,027.00 2.72 TELECOMMUNICATION SERVICES INTG TELECOMM SRVCS 10,000.000 SBC COMMUNICATIONS 237,500.00 2.65 TOTAL COMMON STOCK (Cost: $8,121,487.73) 8,869,829.00 98.91
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 47
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS SHORT TERM INVESTMENTS MONEY MARKET 123,307.87 UMB MONEY MARKET FIDUCIARY 161,531.63 1.80 TOTAL SHORT TERM INVESTMENTS (Cost: $161,531.63) 161,531.63 1.80 TOTAL INVESTMENTS (COST: $8,283,019.36) 9,031,360.63 100.71 OTHER ASSETS LESS LIABILITIES (63,468.69) (0.71) TOTAL NET ASSETS 8,967,891.94 100.00
* Non-income producing. ** The principal amount is stated in U.S. dollars unless otherwise indicated. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 48 PACIFIC ADVISORS SMALL CAP FUND STATEMENT OF INVESTMENTS as of June 30, 2005 (Unaudited)
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS COMMON STOCK CONSUMER DISCRETIONARY APPAREL - RETAIL 44,000.000 ASHWORTH, INC.* 396,440.00 2.28 AUTO PARTS & EQUIP 22,000.000 KEYSTONE AUTOMOTIVE INDUSTRIES, INC.* 544,060.00 3.12 RESTAURANTS 22,000.000 DAVE AND BUSTER'S INC* 405,680.00 2.33 SPECIALTY STORES 34,000.000 CONNS INC.* 831,980.00 4.78 ENERGY INTEGRATED OIL & GAS 15,000.000 KIRBY CORP* 676,500.00 3.88 OIL & GAS EQUIP/SERV 96,000.000 MITCHAM INDUSTRIES INC.* 820,800.00 4.71 OIL & GAS EXPLR/PROD 28,000.000 CHESAPEAKE ENERGY CORP. 638,400.00 3.67 24,000.000 DENBURY RES. INC.* 954,480.00 5.48 10,000.000 REMINGTON OIL & GAS CORP.* 357,000.00 2.05 FINANCIALS REGIONAL BANKS 12,000.000 EAST WEST BANCORP, INC. 403,080.00 2.31 22,000.000 NARA BANK NATIONAL ASSOC. 322,960.00 1.85 SPECIALIZED FINANCE 45,000.000 EZCORP INC.* 482,400.00 2.77 24,000.000 FIRST CASH FINANCIAL SERVICES, INC.* 512,880.00 2.95 HEALTH CARE MANAGED HEALTH CARE 33,000.000 AMERICA SVC GROUP* 523,050.00 3.00 115,000.000 UNITED AMERICAN HEALTH CARE* 253,000.00 1.45 INDUSTRIALS AEROSPACE & DEFENSE 22,000.000 AVIALL INC.* 694,980.00 3.99 BUILDING PRODUCTS 26,000.000 ELKCORP 742,300.00 4.26 CONSTRUCTION & MACH 36,000.000 TITAN INTERNATIONAL INC. 503,280.00 2.89
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 49
QUANTITY OR % OF PRINCIPAL DESCRIPTION CURRENT $ VALUE** NET ASSETS COMMON STOCK CONTINUED DIVERSIFIED COML SRV 130,000.000 DARLING INTERNATIONAL INC.* 487,500.00 2.80 19,000.000 MOBILE MINI INC.* 655,120.00 3.76 24,600.000 TEAM INC* 528,900.00 3.04 ELECTRICAL COMPON/EQ 16,000.000 BELL MICROPRODUCTS INC.* 150,400.00 0.86 22,000.000 ENCORE WIRE CORP* 254,980.00 1.46 ENVIROMENTAL SERVICE 48,000.000 AMERICAN ECOLOGY CORPORATION 859,200.00 4.93 32,000.000 TETRA TECH INC* 432,960.00 2.49 RAILROADS & TRUCKING 33,000.000 FROZEN FOOD EXPRESSS INDUSTRIES INC.* 373,560.00 2.15 62,000.000 RAILAMERICA INC.* 737,800.00 4.24 30,000.000 SCS TRANSPORTATION* 534,000.00 3.07 30,000.000 US XPRESS ENTERPRISE* 357,300.00 2.05 INFORMATION TECHNOLOGY APPLICATION SOFTWARE 85,110.000 INTERVOICE INC* 734,499.30 4.22 SEMICONDUCTOR EQUIP 60,000.000 CAMTEK LIMITED* 166,200.00 0.96 SYSTEMS: SOFTWARE 70,000.000 TYLER TECHNOLOGIES* 529,200.00 3.04 MATERIALS STEEL 30,000.000 COMMERCIAL METALS CO 714,600.00 4.10 90,000.000 GRAFTECH INTL. LTD* 387,000.00 2.22 TELECOMMUNICATION SERVICES INTG TELECOMM SRVCS 34,000.000 TALK AMERICA HOLDING INC.* 340,340.00 1.96 TOTAL COMMON STOCK (Cost: $12,022,767.93) 18,306,829.30 105.12 TOTAL INVESTMENTS (COST: $12,022,767.93) 18,306,829.30 105.12 OTHER ASSETS LESS LIABILITIES (891,167.46) (5.12) TOTAL NET ASSETS 17,415,661.84 100.00
* Non-income producing. ** The principle amount is stated in U.S. dollars unless otherwise indicated. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 50 (This page has been left blank intentionally.) 51 PACIFIC ADVISORS FUND INC. STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) June 30, 2005
INCOME GOVERNMENT AND SECURITIES EQUITY FUND FUND -------------- -------------- ASSETS Investment securities At cost $ 7,857,102 $ 11,512,895 ============== ============== At market value $ 7,881,523 $ 11,559,471 Short-term investments, at cost, which is equal to market 113,801 180,492 Accrued income receivable 74,057 143,187 Receivable for investments sold 88,806 - Receivable for capital shares sold 37,529 37,500 Other assets - - -------------- -------------- Total assets 8,195,716 11,920,650 -------------- -------------- LIABILITIES Bank overdraft - - Payable for investments purchased - - Payable for fund shares redeemed 6,000 - Accounts payable (Note 2.D) 11,167 22,489 Accounts payable to related parties (Note 3) 5,309 6,510 Payable to Investment Manager (Note 3) - 1,017 -------------- -------------- Total liabilities 22,476 30,016 -------------- -------------- NET ASSETS $ 8,173,240 $ 11,890,634 ============== ============== SUMMARY OF SHAREHOLDERS' EQUITY Paid in capital 9,120,660 11,829,958 Accumulated undistributed net investment income 11,763 24,315 Accumulated undistributed net realized gain (losses) on security transactions (983,604) (10,215) Net unrealized appreciation of investments 24,421 46,576 -------------- -------------- Net assets at June 30, 2005 $ 8,173,240 $ 11,890,634 ============== ============== CLASS A: Net assets $ 2,299,364 $ 3,559,381 ============== ============== Shares authorized 50,000,000 50,000,000 Shares outstanding 242,525 344,127 Net asset value and redemption price per share $ 9.48 $ 10.34 ============== ============== Maximum offering price per share $ 9.95 $ 10.86 Sales load 4.75% 4.75% CLASS C: Net assets $ 5,873,876 $ 8,331,253 ============== ============== Shares authorized 50,000,000 50,000,000 Shares outstanding 636,025 841,311 Net asset value and redemption price per share $ 9.24 $ 9.90 ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 52
MULTI-CAP SMALL BALANCED GROWTH VALUE CAP FUND FUND FUND FUND -------------- -------------- -------------- -------------- ASSETS Investment securities At cost $ 28,694,038 $ 1,647,684 $ 8,121,488 $ 12,022,768 ============== ============== ============== ============== At market value $ 35,044,054 $ 1,897,507 $ 8,869,829 $ 18,306,829 Short-term investments, at cost, which is equal to market equal 1,361,541 720,206 161,532 - Accrued income receivable 273,585 1,898 1,697 11,305 Receivable for investments sold 26,008 - 188,227 210,407 Receivable for capital shares sold - - 15,329 200 Other assets - - - - -------------- -------------- -------------- -------------- Total assets 36,705,188 2,619,611 9,236,614 18,528,741 -------------- -------------- -------------- -------------- LIABILITIES Bank overdraft - - - 1,078,695 Payable for investments purchased - 128,680 247,050 - Payable for fund shares redeemed 1,000 - - 23,925 Accounts payable (Note 2.D) 84,127 6,039 8,951 (7,540) Accounts payable to related parties (Note 3) 14,731 1,351 5,472 7,395 Payable to Investment Manager (Note 3) 22,375 - 7,249 10,604 -------------- -------------- -------------- -------------- Total liabilities 122,233 136,070 268,722 1,113,079 -------------- -------------- -------------- -------------- NET ASSETS $ 36,582,955 $ 2,483,541 $ 8,967,892 $ 17,415,662 ============== ============== ============== ============== SUMMARY OF SHAREHOLDERS' EQUITY Paid in capital 30,057,301 2,952,693 8,013,587 10,322,833 Accumulated undistributed net investment income 177,154 - - - Accumulated undistributed net realized gain (losses) on security transactions (1,516) (718,975) 205,964 808,768 Net unrealized appreciation of investments 6,350,016 249,823 748,341 6,284,061 -------------- -------------- -------------- -------------- Net assets at June 30, 2005 $ 36,582,955 $ 2,483,541 $ 8,967,892 $ 17,415,662 ============== ============== ============== ============== CLASS A: Net assets $ 6,040,402 $ 1,390,374 $ 2,544,556 $ 13,570,249 ============== ============== ============== ============== Shares authorized 50,000,000 50,000,000 50,000,000 50,000,000 Shares outstanding 359,961 172,668 220,855 587,254 Net asset value and redemption price per share $ 16.78 $ 8.05 $ 11.52 $ 23.11 ============== ============== ============== ============== Maximum offering price per share $ 17.80 $ 8.54 $ 12.22 $ 24.52 Sales load 5.75% 5.75% 5.75% 5.75% CLASS C: Net assets $ 30,542,553 $ 1,093,167 $ 6,423,336 $ 3,845,413 ============== ============== ============== ============== Shares authorized 50,000,000 50,000,000 50,000,000 50,000,000 Shares outstanding 1,875,740 143,900 570,340 181,586 Net asset value and redemption price per share $ 16.28 $ 7.60 $ 11.26 $ 21.18 ============== ============== ============== ==============
53 STATEMENT OF OPERATIONS (UNAUDITED) For the period ended June 30, 2005
INCOME GOVERNMENT AND SECURITIES EQUITY FUND FUND -------------- -------------- INVESTMENT INCOME Dividends $ 31,393 $ 67,067 Interest 188,867 180,733 -------------- -------------- Total Income 220,260 247,800 -------------- -------------- EXPENSES Investment Management Fees 28,907 43,544 Transfer Agent Fees 19,389 20,738 Fund Accounting Fees 22,156 30,950 Legal Fees 7,200 9,412 Audit Fees 6,582 8,593 Registration Fees 2,135 2,613 Printing 3,247 4,238 Custody Fees 4,652 3,879 Director Fees/Meetings 801 1,045 Distribution Fees (Note 3) 35,524 44,419 Other Expenses 4,775 6,182 -------------- -------------- Total Expenses, Before Fees Waived 135,368 175,613 Less Fees Waived (Note 3) 28,907 32,501 -------------- -------------- Net Expenses 106,461 143,112 -------------- -------------- NET INVESTMENT INCOME (LOSS) 113,799 104,688 ============== ============== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (9,895) (19,188) Net unrealized appreciation (depreciation) of investments (32,679) (131,265) -------------- -------------- (42,574) (150,453) -------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 71,225 $ (45,765) ============== ==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 54
MULTI-CAP SMALL BALANCED GROWTH VALUE CAP FUND FUND FUND FUND -------------- -------------- -------------- -------------- INVESTMENT INCOME Dividends $ 279,068 $ 10,454 $ 56,173 $ 24,600 Interest 416,981 3,414 1,094 - -------------- -------------- -------------- -------------- Total Income 696,049 13,868 57,267 24,600 -------------- -------------- -------------- -------------- EXPENSES Investment Management Fees 131,312 7,703 42,093 74,318 Transfer Agent Fees 48,865 19,042 19,798 44,712 Fund Accounting Fees 89,440 9,067 21,664 48,356 Legal Fees 32,016 2,054 7,205 19,818 Audit Fees 25,912 1,520 5,349 14,666 Registration Fees 18,209 1,748 1,936 14,666 Printing 23,444 1,414 2,297 19,917 Custody Fees 5,128 3,368 3,665 9,017 Director Fees/Meetings 3,152 420 989 1,784 Distribution Fees (Note 3) 153,168 5,614 33,288 39,070 Other Expenses 20,996 1,045 4,392 11,290 -------------- -------------- -------------- -------------- Total Expenses, Before Fees Waived 551,642 52,995 142,676 297,614 Less Fees Waived (Note 3) - 22,703 2,524 - -------------- -------------- -------------- -------------- Net Expenses 551,642 30,292 140,152 297,614 -------------- -------------- -------------- -------------- NET INVESTMENT INCOME (LOSS) 144,407 (16,424) (82,885) (273,014) ============== ============== ============== ============== NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments (5,222) (22,945) 205,964 803,476 Net unrealized appreciation (depreciation) of investments 206,294 (4,099) (321,945) (2,901,934) -------------- -------------- -------------- -------------- 201,072 (27,044) (115,981) (2,098,458) -------------- -------------- -------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 345,479 $ (43,468) $ (198,866) $ (2,371,472) ============== ============== ============== ==============
55 STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
GOVERNMENT SECURITIES FUND ---------------------------------- PERIOD ENDED YEAR ENDED JUNE 30, 2005 DECEMBER 31, 2004 ---------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) $ 113,799 $ 150,054 Net realized gain (loss) on investments (9,895) (117,998) Change in net unrealized appreciation (depreciation) of investments (32,679) (80,124) ---------------------------------- Increase (decrease) in net assets resulting from operations 71,225 (48,068) ---------------------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Class A: Net investment income (34,335) (52,891) Net capital gains - - Class C: Net investment income (71,925) (96,281) Net capital gains - - ---------------------------------- Decrease in net assets resulting from distributions (106,260) (149,172) ---------------------------------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Proceeds from shares sold 482,295 515,159 Proceeds from shares purchased by reinvestment of dividends 94,542 131,825 Cost of shares repurchased (2,279,822) (4,986,174) ---------------------------------- Increase (decrease) in net assets derived from capital share transactions (1,702,985) (4,339,190) ---------------------------------- INCREASE (DECREASE) IN NET ASSETS (1,738,020) (4,536,430) NET ASSETS Beginning of period 9,911,260 14,447,690 ---------------------------------- End of period $ 8,173,240 $ 9,911,260 ==================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 56
INCOME AND EQUITY FUND BALANCED FUND ---------------------------------- ---------------------------------- PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED JUNE 30, 2005 DECEMBER 31, 2004 JUNE 30, 2005 DECEMBER 31, 2004 ---------------------------------- ---------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) $ 104,688 $ 157,825 $ 144,407 $ 107,607 Net realized gain (loss) on investments (19,188) 70,211 (5,222) 95,014 Change in net unrealized appreciation (depreciation) of investments (131,265) 53,886 206,294 1,424,341 ---------------------------------- ---------------------------------- Increase (decrease) in net assets resulting from operations (45,765) 281,922 345,479 1,626,962 ---------------------------------- ---------------------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Class A: Net investment income (33,041) (62,235) - (45,542) Net capital gains - (7,186) - (18,237) Class C: Net investment income (54,747) (94,485) - (41,450) Net capital gains - (16,833) - (94,455) ---------------------------------- ---------------------------------- Decrease in net assets resulting from distributions (87,788) (180,739) - (199,684) ---------------------------------- ---------------------------------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Proceeds from shares sold 1,593,898 4,868,286 2,556,564 7,567,838 Proceeds from shares purchased by reinvestment of dividends 85,034 171,382 - 193,647 Cost of shares repurchased (1,003,670) (1,043,357) (1,485,893) (2,114,128) ---------------------------------- ---------------------------------- Increase (decrease) in net assets derived from capital share transactions 675,262 3,996,311 1,070,671 5,647,357 ---------------------------------- ---------------------------------- INCREASE (DECREASE) IN NET ASSETS 541,709 4,097,494 1,416,150 7,074,635 NET ASSETS Beginning of period 11,348,925 7,251,431 35,166,805 28,092,170 ---------------------------------- ---------------------------------- End of period $ 11,890,634 $ 11,348,925 $ 36,582,955 $ 35,166,805 ================================== ==================================
57
GROWTH FUND ---------------------------------- PERIOD ENDED YEAR ENDED JUNE 30, 2005 DECEMBER 31, 2004 ---------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) $ (16,424) $ (19,379) Net realized gain (loss) on investments (22,945) 9,120 Change in net unrealized appreciation (depreciation) of investments (4,099) 175,858 ---------------------------------- Increase (decrease) in net assets resulting from operations (43,468) 165,599 ---------------------------------- 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 961,437 653,598 Proceeds from shares purchased by reinvestment of dividends - - Cost of shares repurchased (34,559) (138,992) ---------------------------------- Increase (decrease) in net assets derived from capital share transactions 926,878 514,606 ---------------------------------- INCREASE (DECREASE) IN NET ASSETS 883,410 680,205 NET ASSETS Beginning of period 1,600,131 919,926 ---------------------------------- End of period $ 2,483,541 $ 1,600,131 ==================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 58
MULTI-CAP VALUE FUND SMALL CAP FUND ---------------------------------- ---------------------------------- PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED JUNE 30, 2005 DECEMBER 31, 2004 JUNE 30, 2005 DECEMBER 31, 2004 ---------------------------------- ---------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) $ (82,885) $ (114,979) $ (273,014) $ (470,994) Net realized gain (loss) on investments 205,964 262,491 803,476 218,158 Change in net unrealized appreciation (depreciation) of investments (321,945) 278,823 (2,901,934) 5,125,898 ---------------------------------- ---------------------------------- Increase (decrease) in net assets resulting from operations (198,866) 426,335 (2,371,472) 4,873,062 ---------------------------------- ---------------------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS Class A: Net investment income - - - - Net capital gains - (68,529) - (115,121) Class C: Net investment income - - - - Net capital gains - (184,774) - (27,534) ---------------------------------- ---------------------------------- Decrease in net assets resulting from distributions - (253,303) - (142,655) ---------------------------------- ---------------------------------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Proceeds from shares sold 1,041,844 3,538,186 3,610,818 9,008,601 Proceeds from shares purchased by reinvestment of dividends - 250,204 - 110,040 Cost of shares repurchased (309,550) (244,201) (5,047,930) (2,860,457) ---------------------------------- ---------------------------------- Increase (decrease) in net assets derived from capital share transactions 732,294 3,544,189 (1,437,112) 6,258,184 ---------------------------------- ---------------------------------- INCREASE (DECREASE) IN NET ASSETS 533,428 3,717,221 (3,808,584) 10,988,591 NET ASSETS Beginning of period 8,434,464 4,717,243 21,224,246 10,235,655 ---------------------------------- ---------------------------------- End of period $ 8,967,892 $ 8,434,464 $ 17,415,662 $ 21,224,246 ================================== ==================================
59 PACIFIC ADVISORS FUND INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) June 30, 2005 NOTE 1. ORGANIZATION Pacific Advisors Fund Inc. (the "Company") is an open-end diversified investment management company registered under the Investment Company Act of 1940, as amended. The Company currently offers six Funds: 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 differs in its respective service and distribution expenses and may differ in its transfer agent, registration, and certain other class-specific fees and expenses. The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these agreements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 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. D. 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 amounts in the financial statements and footnotes. Actual results could differ from those estimates. Expense are accrued daily based on estimates. Most of the Registration Fees for the Funds were prepaid in the first half year, which may result in negative account payable balances on interim statements. 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 (and with respect to the Income and Equity Fund, also, the Co-Manager) will waive its respective management fees to the extent that the actual operating expenses of the following Funds exceed the following thresholds:
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%
For the Multi-Cap Value Fund only, the expense limitation agreement was terminated on February 15, 2005. For the Growth Fund only, if net expenses exceed the above thresh- olds after waiver of the entire management fee, the Transfer Agent will waive its transfer agency fee to the extent necessary to reduce Class expenses to the above thresholds. These agreements may be terminated by either party, upon 90 days prior written notice. 60 Pursuant to the Expense Limitation Agreements, Providing for the voluntary waiver of fees and the assumption of expenses by the Investment Manager and Transfer Agency, and, with respected to the Income and Equity Fund, the Co-Manager, the following amounts were waived for the period ended June 30, 2005.
MANAGEMENT TRANSFER AGENT FEES FEES WAIVED WAIVED Government Securities Fund $ 28,907 $ - Income and Equity Fund 32,501 - Growth Fund 7,703 15,000 Multi-Cap Value Fund 2,524 -
The Investment Manager terminated all of its rights under the expense limitation agreement with respect to potential recoupment from the Funds from management fees previously waived and expenses previously reimbursed. In the future the Investment 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, 2005, 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 $ 63 $ 340 Income and Equity Fund 187 905 Balanced Fund 1,084 5,432 Growth Fund 1,050 5,273 Multi-Cap Value fund 1,554 7,824 Small Cap Fund 6,141 32,149
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 the 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, 2005, total service fees were:
CLASS A CLASS C Government Securities Fund $ 2,983 $ 32,541 Income and Equity Fund 4,547 39,872 Balanced Fund 7,305 145,863 Growth Fund 1,552 4,062 Multi-Cap Value Fund 2,935 30,353 Small Cap Fund 20,007 19,063
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 on tax basis by each Fund for the period ended and as of June 30, 2005.
PERIOD ENDED JUNE 30, 2005 AS OF JUNE 30, 2005 GROSS GROSS NET UNREALIZED COST OF PROCEEDS UNREALIZED UNREALIZED APPRECIATION PURCHASES FROM SALES APPRECIATION DEPRECIATION (DEPRECIATION) Government Securities Fund $ 6,315,946 $ 5,343,996 $ 39,831 $ 15,410 $ 24,421 Income and Equity Fund 3,059,798 1,394,290 230,104 183,528 46,576 Balanced Fund 4,911,876 3,237,147 6,583,436 233,420 6,350,016 Growth Fund 581,749 33,911 326,094 76,271 249,823 Multi-Cap Value Fund 2,493,111 1,709,578 1,069,030 320,689 748,341 Small Cap Fund 2,785,927 4,270,450 6,638,320 354,259 6,284,061
61 NOTE 5. CAPITAL SHARE TRANSACTIONS Effective July 1, 2004, a 2% redemption fee is assessed on shares of the Government Securities Fund or the Income and Equity Fund sold or exchanged within sixty days of purchase or shares of the Balanced Fund, Growth Fund, Multi-Cap Value Fund or the Small Cap Fund sold or exchanged within six months of purchase. The redemption fee does not apply to shares of the Government Securities Fund, Income and Equity Fund, Balanced Fund or Multi-Cap Value Fund purchased before July 1, 2004. The redemption fees collected through June 30, 2005, are included as a reduction to the shares repurchased in the table below. The amount of the reduction is as follows:
Growth Fund Class A $ 34 Multi-Cap Value Fund Class A 40 Small Cap Fund Class A 6,859 Balanced Fund Class C $ 519 Income and Equity Fund Class C 215 Multi-Cap Value Fund Class C 80
PERIOD ENDED YEAR ENDED JUNE 30, 2005 DECEMBER 31, 2004 -------------------------------- -------------------------------- SHARES AMOUNT SHARES AMOUNT -------------------------------- -------------------------------- GOVERNMENT SECURITIES FUND Class A Shares Sold 6,633 $ 62,900 9,692 $ 92,986 Reinvestment of Distributions 2,498 23,573 3,863 36,863 -------------------------------- -------------------------------- 9,131 86,473 13,555 129,849 Shares Repurchased (28,130) (267,536) (64,505) (618,244) -------------------------------- -------------------------------- Net Decrease (18,999) $ (181,063) (50,950) $ (488,395) ================================ ================================ Class C Shares Sold 45,388 $ 419,395 45,269 $ 422,173 Reinvestment of Distributions 7,717 70,969 10,222 94,962 -------------------------------- -------------------------------- 53,105 490,364 55,491 517,135 Shares Repurchased (217,578) (2,012,286) (465,886) (4,367,930) -------------------------------- -------------------------------- Net Decrease (164,473) $ (1,521,922) (410,395) $ (3,850,795) ================================ ================================ PERIOD ENDED YEAR ENDED JUNE 30, 2005 DECEMBER 31, 2004 -------------------------------- -------------------------------- SHARES AMOUNT SHARES AMOUNT -------------------------------- -------------------------------- INCOME AND EQUITY FUND Class A Shares Sold 56,361 $ 584,733 218,049 $ 2,278,445 Reinvestment of Distributions 3,053 31,398 6,044 62,936 -------------------------------- -------------------------------- 59,414 616,131 224,093 2,341,381 Shares Repurchased (60,687) (629,258) (56,402) (586,655) -------------------------------- -------------------------------- Net Increase (Decrease) (1,273) $ (13,127) 167,691 $ 1,754,726 ================================ ================================ Class C Shares Sold 101,669 $ 1,009,165 260,189 $ 2,589,841 Reinvestment of Distributions 5,441 53,636 10,853 108,446 -------------------------------- -------------------------------- 107,110 1,062,801 271,042 2,698,287 Shares Repurchased (37,890) (374,412) (45,884) (456,702) -------------------------------- -------------------------------- Net Increase 69,220 $ 688,389 225,158 $ 2,241,585 ================================ ================================
62
PERIOD ENDED YEAR ENDED JUNE 30, 2005 DECEMBER 31, 2004 -------------------------------- -------------------------------- SHARES AMOUNT SHARES AMOUNT -------------------------------- -------------------------------- BALANCED FUND Class A Shares Sold 29,643 $ 489,368 87,697 $ 1,393,685 Reinvestment of Distributions - - 3,571 59,108 -------------------------------- -------------------------------- 29,643 489,368 91,268 1,452,793 Shares Repurchased (23,604) (388,020) (35,754) (568,882) -------------------------------- -------------------------------- Net Increase 6,039 $ 101,348 55,514 $ 883,911 ================================ ================================ Class C Shares Sold 128,051 $ 2,067,196 400,028 $ 6,174,154 Reinvestment of Distributions - - 8,346 134,538 -------------------------------- -------------------------------- 128,051 2,067,196 408,374 6,308,692 Shares Repurchased (68,625) (1,097,873) (99,833) (1,545,246) -------------------------------- -------------------------------- Net Increase 59,426 $ 969,323 308,541 $ 4,763,446 ================================ ================================ PERIOD ENDED YEAR ENDED JUNE 30, 2005 DECEMBER 31, 2004 -------------------------------- -------------------------------- SHARES AMOUNT SHARES AMOUNT -------------------------------- -------------------------------- GROWTH FUND Class A Shares Sold 32,950 $ 265,125 63,114 $ 481,133 Reinvestment of Distributions - - - - -------------------------------- -------------------------------- 32,950 265,125 63,114 481,133 Shares Repurchased (697) (5,543) (16,365) (121,527) -------------------------------- -------------------------------- Net Increase 32,253 $ 259,582 46,749 $ 359,606 ================================ ================================ Class C Shares Sold 90,597 $ 696,312 22,880 $ 172,465 Reinvestment of Distributions - - - - -------------------------------- -------------------------------- 90,597 696,312 22,880 172,465 Shares Repurchased (3,881) (29,016) (2,430) (17,465) -------------------------------- -------------------------------- Net Increase 86,716 $ 667,296 20,450 $ 155,000 ================================ ================================
63
PERIOD ENDED YEAR ENDED JUNE 30, 2005 DECEMBER 31, 2004 -------------------------------- -------------------------------- SHARES AMOUNT SHARES AMOUNT -------------------------------- -------------------------------- MULTI-CAP VALUE FUND Class A Shares Sold 30,979 $ 352,249 96,925 $ 1,113,082 Reinvestment of Distributions - - 5,615 66,475 -------------------------------- -------------------------------- 30,979 352,249 102,540 1,179,557 Shares Repurchased (6,683) (73,306) (8,958) (102,650) -------------------------------- -------------------------------- Net Increase 24,296 $ 278,943 93,582 $ 1,076,907 ================================ ================================ Class C Shares Sold 61,617 $ 689,595 214,418 $ 2,425,104 Reinvestment of Distributions - - 15,822 183,729 -------------------------------- -------------------------------- 61,617 689,595 230,240 2,608,833 Shares Repurchased (21,538) (236,244) (12,322) (141,551) -------------------------------- -------------------------------- Net Increase 40,079 $ 453,351 217,918 $ 2,467,282 ================================ ================================ PERIOD ENDED YEAR ENDED JUNE 30, 2005 DECEMBER 31, 2004 -------------------------------- -------------------------------- SHARES AMOUNT SHARES AMOUNT -------------------------------- -------------------------------- SMALL CAP FUND Class A Shares Sold 127,450 $ 3,104,868 321,745 $ 6,934,841 Reinvestment of Distributions - - 3,336 84,426 -------------------------------- -------------------------------- 127,450 3,104,868 325,081 7,019,267 Shares Repurchased (222,293) (4,946,335) (120,496) (2,560,641) -------------------------------- -------------------------------- Net Increase (Derease) (94,843) $ (1,841,467) 204,585 $ 4,458,626 ================================ ================================ Class C Shares Sold 22,574 $ 505,950 105,393 $ 2,073,760 Reinvestment of Distributions - - 1,099 25,614 -------------------------------- -------------------------------- 22,574 505,950 106,492 2,099,374 Shares Repurchased (5,141) (101,595) (15,518) (299,816) -------------------------------- -------------------------------- Net Increase 17,433 $ 404,355 90,974 $ 1,799,558 ================================ ================================
64 PACIFIC ADVISORS FUND INC. FINANCIAL HIGHLIGHTS (UNAUDITED) (For a share outstanding throughout the period)
GOVERNMENT SECURITIES FUND --------------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------------- JUNE 30,2005 2004 2003 2002 2001 --------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 9.51 $ 9.68 $ 10.20 $ 10.15 $ 10.88 ------------------ ---------- ---------- ---------- ---------- Income from investing operations Net investment income 0.17 0.23 0.35 0.31 0.31 Net realized and unrealized gains (losses) on securities (0.06) (0.20) (0.57) (0.04) (0.37) ------------------ ---------- ---------- ---------- ---------- Total from investment operations 0.11 0.03 (0.22) 0.27 (0.06) ------------------ ---------- ---------- ---------- ---------- Less distributions From net investment income (0.14) (0.20) (0.30) (0.21) (0.29) From net capital gains - - - (0.01) (0.38) ------------------ ---------- ---------- ---------- ---------- Total distributions (0.14) (0.20) (0.30) (0.22) (0.67) ------------------ ---------- ---------- ---------- ---------- Net asset value, end of period $ 9.48 $ 9.51 $ 9.68 $ 10.20 $ 10.15 ================== ========== ========== ========== ========== TOTAL INVESTMENT RETURN (a) 1.16%(b) 0.26% (2.20)% 2.78% (0.49)% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 2,299 $ 2,488 $ 3,025 $ 4,125 $ 6,487 Ratio of net investment income to average net assets With expense reductions 3.11%(c) 1.89% 2.88% 2.57% 3.01% Without expense reductions 2.46%(c) 1.23% 2.33% 1.42% 2.22% Ratio of expenses to average net assets With expense reductions 1.85%(c) 1.81% 1.65% 1.65% 1.65% Without expense reductions 2.50%(c) 2.46% 2.20% 2.80% 2.43% Fund portfolio turnover rate 127.72%(c) 402.70% 206.55% 212.10% 75.81% CLASS C --------------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------------- JUNE 30,2005 2004 2003 2002 2001 --------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 9.27 $ 9.43 $ 9.95 $ 9.96 $ 10.74 ------------------ ---------- ---------- ---------- ---------- Income from investing operations Net investment income 0.10 0.09 0.21 0.23 0.25 Net realized and unrealized gains (losses) on securities (0.02) (0.14) (0.50) (0.04) (0.38) ------------------ ---------- ---------- ---------- ---------- Total from investment operations 0.08 (0.05) (0.29) 0.19 (0.13) ------------------ ---------- ---------- ---------- ---------- Less distributions From net investment income (0.11) (0.11) (0.23) (0.19) (0.27) From net capital gains - - - (0.01) (0.38) ------------------ ---------- ---------- ---------- ---------- Total distributions (0.11) (0.11) (0.23) (0.20) (0.65) ------------------ ---------- ---------- ---------- ---------- Net asset value, end of period $ 9.24 $ 9.27 $ 9.43 $ 9.95 $ 9.96 ================== ========== ========== ========== ========== TOTAL INVESTMENT RETURN (a) 0.86%(b) (0.50)% (2.98)% 1.98% (1.21)% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 5,874 $ 7,424 $ 11,423 $ 10,858 $ 4,172 Ratio of net investment income to average net assets With expense reductions 2.36%(c) 1.10% 2.23% 1.90% 2.25% Without expense reductions 1.71%(c) 0.45% 1.67% 0.81% 1.28% Ratio of expenses to average net assets With expense reductions 2.60%(c) 2.57% 2.39% 2.40% 2.40% Without expense reductions 3.25%(c) 3.22% 2.95% 3.49% 3.37% Fund portfolio turnover rate 127.72%(c) 402.70% 206.55% 212.10% 75.81%
(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 65
INCOME AND EQUITY FUND --------------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------------- JUNE 30,2005 2004 2003 2002 2001 --------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 10.46 $ 10.33 $ 9.91 $ 10.31 $ 10.43 ------------------ ---------- ---------- ---------- ---------- Income from investing operations Net investment Income 0.12 0.07 0.33 0.39 0.42 Net realized and unrealized gains (losses) on securities (0.15) 0.29 0.31 (0.49) (0.14) ------------------ ---------- ---------- ---------- ---------- Total from investment operations (0.03) 0.36 0.64 (0.10) 0.28 ------------------ ---------- ---------- ---------- ---------- Less distributions From net investment income (0.09) (0.21) (0.20) (0.30) (0.40) From net capital gains - (0.02) - - - From return of capital - - (0.02) - - ------------------ ---------- ---------- ---------- ---------- Total distributions (0.09) (0.23) (0.22) (0.30) (0.40) ------------------ ---------- ---------- ---------- ---------- Net asset value, end of period $ 10.34 $ 10.46 $ 10.33 $ 9.91 $ 10.31 ================== ========== ========== ========== ========== TOTAL INVESTMENT RETURN (a) (0.23)%(b) 3.51% 6.63% (0.92)% 2.63% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 3,559 $ 3,611 $ 1,835 $ 2,117 $ 2,708 Ratio of net investment income to average net assets With expense reductions 2.31%(c) 2.18% 2.92% 3.43% 4.28% Without expense reductions 1.75%(c) 1.49% 1.84% 1.75% 2.66% Ratio of expenses to average net assets With expense reductions 1.95%(c) 1.94% 1.85% 1.85% 1.85% Without expense reductions 2.51%(c) 2.63% 2.94% 3.53% 3.47% Fund portfolio turnover rate 26.44%(c) 40.48% 71.02% 91.50% 43.38% CLASS C --------------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------------- JUNE 30,2005 2004 2003 2002 2001 --------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 10.02 $ 9.90 $ 9.60 $ 10.03 $ 10.26 ------------------ ---------- ---------- ---------- ---------- Income from investing operations Net investment Income 0.08 0.16 0.24 0.34 0.42 Net realized and unrealized gains (losses) on securities (0.13) 0.11 0.32 (0.51) (0.22) ------------------ ---------- ---------- ---------- ---------- Total from investment operations (0.05) 0.27 0.56 (0.17) 0.20 ------------------ ---------- ---------- ---------- ---------- Less distributions From net investment income (0.07) (0.13) (0.22) (0.26) (0.43) From net capital gains - (0.02) - - - From return of capital - - (0.02) - - ------------------ ---------- ---------- ---------- ---------- Total distributions (0.07) (0.15) (0.24) (0.26) (0.43) ------------------ ---------- ---------- ---------- ---------- Net asset value, end of period $ 9.90 $ 10.02 $ 9.90 $ 9.60 $ 10.03 ================== ========== ========== ========== ========== TOTAL INVESTMENT RETURN (a) (0.54)%(b) 2.74% 5.88% (1.60)% 1.81% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 8,331 $ 7,738 $ 5,416 $ 3,284 $ 1,365 Ratio of net investment income to average net assets With expense reductions 1.57%(c) 1.38% 2.10% 2.95% 3.58% Without expense reductions 1.01%(c) 0.70% 1.03% 1.15% 1.65% Ratio of expenses to average net assets With expense reductions 2.70%(c) 2.69% 2.60% 2.60% 2.60% Without expense reductions 3.26%(c) 3.37% 3.67% 4.39% 4.54% Fund portfolio turnover rate 26.44%(c) 40.48% 71.02% 91.50% 43.38%
(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 66
BALANCED FUND --------------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------------- JUNE 30,2005 2004 2003 2002 2001 --------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 16.57 $ 15.88 $ 13.69 $ 14.42 $ 15.22 ------------------ ---------- ---------- ---------- ---------- Income from investing operations Net investment income 0.11 0.12 0.21 0.06 0.10 Net realized and unrealized gains (losses) on securities 0.10 0.75 2.34 (0.79) (0.81) ------------------ ---------- ---------- ---------- ---------- Total from investment operations 0.21 0.87 2.55 (0.73) (0.71) ------------------ ---------- ---------- ---------- ---------- Less distributions From net investment income - (0.13) (0.16) - (0.09) From net capital gains - (0.05) (0.18) - - From return of capital - - (0.02) - - ------------------ ---------- ---------- ---------- ---------- Total distributions - (0.18) (0.36) - (0.09) ------------------ ---------- ---------- ---------- ---------- Net asset value, end of period $ 16.78 $ 16.57 $ 15.88 $ 13.69 $ 14.42 ================== ========== ========== ========== ========== TOTAL INVESTMENT RETURN (a) 1.27%(b) 5.50% 18.63% (5.05)% (4.69)% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 6,040 $ 5,863 $ 4,739 $ 3,977 $ 5,013 Ratio of net investment income to average net assets With expense reductions 1.45%(c) 0.98% 1.44% 0.30% 0.55% Without expense reductions 1.45%(c) 0.98% 1.44% 0.30% 0.55% Ratio of expenses to average net assets With expense reductions 2.53%(c) 2.67% 2.86% 3.47% 3.22% Without expense reductions 2.53%(c) 2.67% 2.86% 3.47% 3.22% Fund portfolio turnover rate 20.48%(c) 39.60% 58.73% 57.74% 42.20% CLASS C --------------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------------- JUNE 30,2005 2004 2003 2002 2001 --------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 16.13 $ 15.49 $ 13.40 $ 14.18 $ 14.99 ------------------ ---------- ---------- ---------- ---------- Income from investing operations Net investment income 0.06 0.04 0.09 0.01 0.01 Net realized and unrealized gains (losses) on securities 0.09 0.68 2.26 (0.79) (0.80) ------------------ ---------- ---------- ---------- ---------- Total from investment operations 0.15 0.72 2.35 (0.78) (0.79) ------------------ ---------- ---------- ---------- ---------- Less distributions From net investment income - (0.03) (0.06) - (0.02) From net capital gains - (0.05) (0.18) - - From return of capital - - (0.02) - - ------------------ ---------- ---------- ---------- ---------- Total distributions - (0.08) (0.26) - (0.02) ------------------ ---------- ---------- ---------- ---------- Net asset value, end of period $ 16.28 $ 16.13 $ 15.49 $ 13.40 $ 14.18 ================== ========== ========== ========== ========== TOTAL INVESTMENT RETURN (a) 0.93%(b) 4.62% 17.58% (5.49)% (5.25)% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 30,543 $ 29,304 $ 23,353 $ 14,035 $ 7,404 Ratio of net investment income to average net assets With expense reductions 0.70%(c) 0.21% 0.67% (0.16)% (0.08)% Without expense reductions 0.70%(c) 0.21% 0.67% (0.16)% (0.08)% Ratio of expenses to average net assets With expense reductions 3.28%(c) 3.44% 3.66% 4.15% 3.99% Without expense reductions 3.28%(c) 3.44% 3.66% 4.15% 3.99% Fund portfolio turnover rate 20.48%(c) 39.60% 58.73% 57.74% 42.20%
(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 67
GROWTH FUND --------------------------------------------------------------------------------- CLASS A --------------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------------- JUNE 30,2005 2004 2003 2002 2001 --------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 8.22 $ 7.14 $ 5.48 $ 7.04 $ 9.83 ------------------ ---------- ---------- ---------- ---------- Income from investing operations Net investment income (expense) 0.01 0.02 (0.07) (0.12) (0.11) Net realized and unrealized gains (losses) on securities (0.18) 1.06 1.73 (1.44) (2.68) ------------------ ---------- ---------- ---------- ---------- Total from investment operations (0.17) 1.08 1.66 (1.56) (2.79) ------------------ ---------- ---------- ---------- ---------- Less distributions From net investment income - - - - - From net capital gains - - - - - ------------------ ---------- ---------- ---------- ---------- Total distributions - - - - - ------------------ ---------- ---------- ---------- ---------- Net asset value, end of period $ 8.05 $ 8.22 $ 7.14 $ 5.48 $ 7.04 ================== ========== ========== ========== ========== TOTAL INVESTMENT RETURN (a) (2.07)%(b) 15.13% 30.29% (22.16)% (28.38)% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 1,390 $ 1,155 $ 669 $ 464 $ 588 Ratio of net investment income to average net assets With expense reductions (1.32)%(c) (1.51)% (1.69)% (1.97)% (1.26)% Without expense reductions (3.49)%(c) (4.98)% (7.44)% (8.25)% (5.44)% Ratio of expenses to average net assets With expense reductions 2.65%(c) 2.83% 2.48% 2.50% 2.44% Without expense reductions 4.82%(c) 6.30% 8.23% 8.77% 6.62% Fund portfolio turnover rate 4.32%(c) 12.96% 34.58% 78.06% 57.61% CLASS C --------------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------------- JUNE 30,2005 2004 2003 2002 2001 --------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 7.79 $ 6.83 $ 5.33 $ 6.89 $ 9.70 ------------------ ---------- ---------- ---------- ---------- Income from investing operations Net investment income (expense) 0.36 0.22 (0.16) (0.44) (0.22) Net realized and unrealized gains (losses) on securities (0.55) 0.74 1.66 (1.12) (2.59) ------------------ ---------- ---------- ---------- ---------- Total from investment operations (0.19) 0.96 1.50 (1.56) (2.81) ------------------ ---------- ---------- ---------- ---------- Less distributions From net investment income - - - - - From net capital gains - - - - - ------------------ ---------- ---------- ---------- ---------- Total distributions - - - - - ------------------ ---------- ---------- ---------- ---------- Net asset value, end of period $ 7.60 $ 7.79 $ 6.83 $ 5.33 $ 6.89 ================== ========== ========== ========== ========== TOTAL INVESTMENT RETURN (a) (2.44)%(b) 14.06% 28.14% (22.64)% (28.97)% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 1,093 $ 445 $ 251 $ 190 $ 439 Ratio of net investment income to average net assets With expense reductions (2.02)%(c) (2.27)% (2.47)% (2.75)% (2.04)% Without expense reductions (4.28)%(c) 5.61% (8.18)% (8.67)% (5.59)% Ratio of expenses to average net assets With expense reductions 3.40%(c) 3.54% 3.25% 3.25% 3.23% Without expense reductions 5.65%(c) 6.88% 8.96% 9.17% 6.77% Fund portfolio turnover rate 4.32%(c) 12.96% 34.58% 78.06% 57.61%
(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 68
MULTI-CAP VALUE FUND ------------------------------------------------------------------------ CLASS A ------------------------------------------------------------------------ FOR THE YEAR ENDED FOR THE SIX MONTHS DECEMBER 31, APRIL 1, 2002(c) ENDED ----------------------- TO JUNE 30,2005 2004 2003 DECEMBER 31, 2002 ------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 11.77 $ 11.46 $ 7.95 $ 10.00 ------------------ --------- --------- ------------------ Income from investing operations Net investment expense (0.06) (0.03) (0.09) (0.07) Net realized and unrealized gains (losses) on securities (0.19) 0.70 3.60 (1.98) ------------------ --------- --------- ------------------ Total from investment operations (0.25) 0.67 3.51 (2.05) ------------------ --------- --------- ------------------ Less distributions From net investment income - - - - From net capital gains - (0.36) - - ------------------ --------- --------- ------------------ Total distributions - (0.36) - - ------------------ --------- --------- ------------------ Net asset value, end of period $ 11.52 $ 11.77 $ 11.46 $ 7.95 ================== ========= ========= ================== TOTAL INVESTMENT RETURN (a) (2.12)%(b) 5.84% 44.15% (20.50)%(b) RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 2,545 $ 2,313 $ 1,180 $ 503 Ratio of net investment income to average net assets With expense reductions (1.43)%(d) (1.15)% (1.67)% (1.44)%(d) Without expense reductions (1.49)%(d) (1.15)% (3.14)% (5.65)%(d) Ratio of expenses to average net assets With expense reductions 2.79%(d) 2.63% 2.49% 2.49%(d) Without expense reductions 2.85%(d) 3.07% 3.96% 6.69%(d) Fund portfolio turnover rate 40.92%(d) 49.30% 20.16% 8.23%(d) CLASS C ------------------------------------------------------------------------ FOR THE YEAR ENDED FOR THE SIX MONTHS DECEMBER 31, APRIL 1, 2002(c) ENDED ----------------------- TO JUNE 30,2005 2004 2003 DECEMBER 31, 2002 ------------------------------------------------------------------------ PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 11.54 $ 11.33 $ 7.91 $ 10.00 ------------------ --------- --------- ------------------ Income from investing operations Net investment income (expense) (0.10) (0.10) 0.32 (0.52) Net realized and unrealized gains (losses) on securities (0.18) 0.67 3.10 (1.57) ------------------ --------- --------- ------------------ Total from investment operations (0.28) 0.57 3.42 (2.09) ------------------ --------- --------- ------------------ Less distributions From net investment income - - - - From net capital gains - (0.36) - - ------------------ --------- --------- ------------------ Total distributions - (0.36) - - ------------------ --------- --------- ------------------ Net asset value, end of period $ 11.26 $ 11.54 $ 11.33 $ 7.91 ================== ========= ========= ================== TOTAL INVESTMENT RETURN (a) (2.43)%(b) 5.02% 43.24% (20.90)%(b) RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 6,423 $ 6,122 $ 3,537 $ 1,247 Ratio of net investment income to average net assets With expense reductions (2.18)%(d) (1.94)% (2.41)%(d) (2.20)%(d) Without expense reductions (2.24)%(d) (2.37)% (3.90)%(d) (6.08)%(d) Ratio of expenses to average net assets With expense reductions 3.54%(d) 3.40% 3.24%(d) 3.23%(d) Without expense reductions 3.60%(d) 3.83% 4.74%(d) 7.11%(d) Fund portfolio turnover rate 40.92%(d) 49.30% 20.16% 8.23%(d)
(a) The Fund's maximum sales charge is not included in the total return computation (b) Not annualized (c) Commencement of operations (d) Annualized SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 69
SMALL CAP FUND --------------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------------- JUNE 30,2005 2004 2003 2002 2001 --------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 25.47 $ 18.77 $ 10.32 $ 15.23 $ 13.42 ------------------ ---------- ---------- ---------- ---------- Income from investing operations Net investment expense (0.93) 0.73 (0.37) (0.85) (0.42) Net realized and unrealized gains (losses) on securities (1.43) 6.14 8.95 (4.05) 3.11 ------------------ ---------- ---------- ---------- ---------- Total from investment operations (2.36) 6.87 8.58 (4.90) 2.69 ------------------ ---------- ---------- ---------- ---------- Less distributions From net investment income - - - - - From net capital gains - (0.17) (0.13) (0.01) (0.88) ------------------ ---------- ---------- ---------- ---------- Total distributions - (0.17) (0.13) (0.01) (0.88) ------------------ ---------- ---------- ---------- ---------- Net asset value, end of period $ 23.11 $ 25.47 $ 18.77 $ 10.32 $ 15.23 ================== ========== ========== ========== ========== TOTAL INVESTMENT RETURN (a) (9.27)%(b) 36.60% 83.21% (32.20)% 20.23% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 13,570 $ 17,376 $ 8,961 $ 4,763 $ 7,715 Ratio of net investment income to average net assets With expense reductions (2.61)%(c) (3.08)% (4.06)% (4.01)% (3.44)% Without expense reductions (2.61)%(c) (3.08)% (4.06)% (4.01)% (3.44)% Ratio of expenses to average net assets With expense reductions 2.86%(c) 3.32% 4.44% 4.52% 3.74% Without expense reductions 2.86%(c) 3.32% 4.44% 4.52% 3.74% Fund portfolio turnover rate 26.76%(c) 7.23% 39.95% 23.39% 43.89% CLASS C --------------------------------------------------------------------------------- FOR THE SIX MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED ------------------------------------------------------- JUNE 30,2005 2004 2003 2002 2001 --------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 23.44 $ 17.41 $ 9.65 $ 14.47 $ 13.04 ------------------ ---------- ---------- ---------- ---------- Income from investing operations Net investment expense (0.20) 0.66 0.04 (0.88) (0.08) Net realized and unrealized gains (losses) on securities (2.06) 5.54 7.85 (3.93) 2.39 ------------------ ---------- ---------- ---------- ---------- Total from investment operations (2.26) 6.20 7.89 (4.81) 2.31 ------------------ ---------- ---------- ---------- ---------- Less distributions From net investment income - - - - - From net capital gains - (0.17) (0.13) (0.01) (0.88) ------------------ ---------- ---------- ---------- ---------- Total distributions - (0.17) (0.13) (0.01) (0.88) ------------------ ---------- ---------- ---------- ---------- Net asset value, end of period $ 21.18 $ 23.44 $ 17.41 $ 9.65 $ 14.47 ================== ========== ========== ========== ========== TOTAL INVESTMENT RETURN (a) (9.64)%(b) 35.62% 81.83% (33.27)% 17.91% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's) $ 3,845 $ 3,848 $ 1,274 $ 543 $ 886 Ratio of net investment income to average net assets With expense reductions (3.35)%(c) (3.85)% (4.88)% (5.47)% (5.48)% Without expense reductions (3.35)%(c) (3.85)% (4.88)% (5.47)% (5.48)% Ratio of expenses to average net assets With expense reductions 3.61%(c) 4.10% 5.26% 5.97% 5.78% Without expense reductions 3.61%(c) 4.10% 5.26% 5.97% 5.78% Fund portfolio turnover rate 26.76%(c) 7.23% 39.95% 23.39% 43.89%
(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 70 PACIFIC ADVISORS FUND INC. DIRECTORS AND OFFICERS
NUMBER OF PORTFOLIOS IN POSITION(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 (71) 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 (54) Director Since 1992 1992 - Present: Assistant 6 Pacific Advisors None 603 West Ojai Avenue and Assistant Secretary and Director, Mutual Funds Ojai, CA 93023 Secretary Pacific Global Investment Management Company, Pacific Global Investor Services, Inc. 1994 - Present: Agent, Transamerica Life Companies and Registered Principal, Transamerica Financial Advisors, Inc. 1986 - Present: President, Derby & Derby Inc. (Financial Services Company)
71
NUMBER OF PORTFOLIOS IN POSITION(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 H. Hanson (55) Vice President Since 1992 1992 - Present: Executive 6 Pacific Advisors None 101 N. Brand Blvd. and Secretary Vice President and Mutual Funds Suite 1950 Director, Pacific Global Glendale, CA 91203 Investment Management Company; President and Director, Pacific Global Fund Distributors, Inc.; Director, Pacific Global Investor Services, Inc. 2001 - Present: Vice President, Pacific Global Investor Services, Inc. 1997 - 2001: Vice President and Director, Pacific Global Investment Fund Ltd. 1992 - 2001: President, Pacific Global Investor Services, Inc. 1993 - Present: Owner, Director, Chairman, President and CEO of TriVest Capital Management, Inc. Catherine L. Henning (27) Assistant Since 2002 2004 - Present: Secretary, 6 Pacific Advisors None 101 N. Brand Blvd. Secretary Pacific Global Investment Mutual Funds Suite 1950 Management Company Glendale, CA 91203 2002 - 2004: Assistant Secretary, Pacific Global Investment Management Company 2002 - Present: Assistant Secretary, Pacific Global Fund Distributors, Inc. and Pacific Global Investor Services, Inc. 1999 - Present: Marketing Coordinator, Pacific Global Investment Management Company
72
NUMBER OF PORTFOLIOS IN POSITION(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 - ------------------------------------------------------------------------------------------------------------------------------------ George A. Henning (58) President and Since 1992 1991 - Present: Chairman, 6 Pacific Advisors None 101 N. Brand Blvd. Chairman President, and Director, Mutual Funds Suite 1950 Pacific Global Investment Glendale, CA 91203 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 (51) Vice President, Since 2001 2004 - Present: Chief 6 Pacific Advisors None 101 N. Brand Blvd. Chief Compliance Officer, Mutual Funds Suite 1950 Compliance Pacific Advisors Fund Inc. Glendale, CA 91203 Officer and and Pacific Global Treasurer Investment Management Company 2001 - Present: Executive Vice President, Treasurer, Pacific Global Investment 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
73
NUMBER OF PORTFOLIOS IN POSITION(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 (61) Director Since 1992 2004 - Present: Consultant 6 Pacific Advisors None 5924 Colodny Mutual Funds Agoura, CA 91301 2002 - 2003: Executive Vice President, Sammy Studios, Inc. (Entertainment Company) 2001 - 2002: Vice President and Executive Producer, Electronic Arts; President, International Media Group, Inc. (Entertainment Company) 2000 - 2001: Senior Vice President, Infogrames (Entertainment Company) Takashi Makinodan, Ph.D (80) Director Since 1995 1992 - Present: Director, 6 Pacific Advisors None 1506 S. Bentley Avenue Medical Treatment Mutual Funds PH #5 Effectiveness Program Los Angeles, CA 90025 (MEDTEP), Center on Asian and Pacific Islanders 1991 - Present: Associate Director of Research, Geriatric Research Education Clinic Center, VA Medical Center Gerald E. Miller (75) Director Since 1992 1992 - Present: Retired 6 Pacific Advisors None 5262 Bridgetown Place Mutual Funds Westlake Village, CA 91362 Louise K. Taylor, Ph.D (58) 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. 74 PACIFIC ADVISORS FUND INC. notes 75 PACIFIC ADVISORS FUND INC. notes 76 [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 101 NORTH BRAND BLVD., SUITE 1950 GLENDALE, CALIFORNIA 91203 INCOME AND EQUITY FUND CO-MANAGER AND BALANCED FUND ADVISER BACHE CAPITAL MANAGEMENT, INC. 101 NORTH BRAND BLVD., SUITE 1950 GLENDALE, CALIFORNIA 91203 TRANSFER AGENT AND ADMINISTRATOR PACIFIC GLOBAL INVESTOR SERVICES, INC. 101 NORTH BRAND BLVD., SUITE 1950 GLENDALE, CALIFORNIA 91203 DISTRIBUTOR PACIFIC GLOBAL FUND DISTRIBUTORS, INC. 101 NORTH BRAND BLVD., SUITE 1950 GLENDALE, CALIFORNIA 91203 (800) 989-6693 AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information about the operation of the Public Reference Room may be obtained by calling the SEC at (800) SEC-0330. The Fund's complete schedule of portfolio holdings for each fiscal quarter is posted on the Fund's Web site at www.PacificAdvisorsFund.com and is available without charge, upon request by calling (800) 989-6693. Documents will be sent within 3 business days of receipt of your request. AVAILABILITY OF PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request by calling (800) 989-6693. Documents will be sent within 3 business days of receipt of your request. This information is also available on the SEC's Web site at http://www.sec.gov. [LOGO] PACIFIC GLOBAL FUND DISTRIBUTORS, INC. PRSRT STD 101 NORTH BRAND BLVD., SUITE 1950 U. S. POSTAGE GLENDALE, CALIFORNIA 91203 PAID CHICAGO, IL PERMIT NO. 5750 pg101.898 Item 2. Code of Ethics Not applicable for semi-annual reports. Item 3. Audit Committee Financial Expert Not applicable for semi-annual reports. Item 4. Principal Accountant Fees and Services Not applicable for semi-annual reports. Item 5. Audit Committee of Listed Registrants Not applicable as Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934. Item 6. Schedule of Investments Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies Not applicable to open-end investment companies. Item 8. Portfolio Managers of Closed-End Management Investment Companies Not applicable to open-end investment companies. Item 9. Purchases of Equity Securities by Managers of Closed-End Management Investment Company and Affiliated Purchasers. Not applicable to open-end investment companies. Item 10. Submission of Matters to a Vote of Security Holders No material changes have been made. Item 11. Controls and Procedures. (a) Based upon their evaluation of 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-CSR, 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 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 were no changes in Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, Registrant's internal control over financial reporting. Item 12. Exhibits (a)(1) Not applicable. (a)(2) Certifications required by Item 12(a) of Form N-CSR 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, 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: /s/ George A. Henning ----------------------- George A. Henning Chairman, Pacific Advisors Fund Inc. Date: September 7, 2005 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 Registrant and in the capacities and on the dates indicated. By: /s/ George A. Henning ----------------------- George A. Henning Chief Executive Officer Date: September 7, 2005 By: /s/ Barbara A. Kelley ----------------------- Barbara A. Kelley Chief Financial Officer Date: September 7, 2005 EX-99.CERT 2 a2162537zex-99_cert.txt EXHIBIT 99.CERT Exhibit 99.Cert PACIFIC ADVISORS FUND Exhibit 12(a)(2) to Form N-CSR I, George A. Henning, certify that: 1. I have reviewed this report on Form N-CSR 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. 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) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for 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 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of 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; and (d) Disclosed in this report any change in Registrant's internal control over financial reporting that occurred during Registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, Registrant's internal control over financial reporting; and 5. Registrant's other certifying officer(s) and I have disclosed to Registrant's auditors and the audit committee of 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 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 Registrant's internal control over financial reporting. Date: September 7, 2005 Signature: /s/ George A. Henning ------------------------- Chairman and Chief Executive Officer PACIFIC ADVISORS FUND Exhibit 12(a)(2) to Form N-CSR I, Barbara A. Kelley, certify that: 1. I have reviewed this report on Form N-CSR 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. 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) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for 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 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of 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; and (d) Disclosed in this report any change in Registrant's internal control over financial reporting that occurred during Registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, Registrant's internal control over financial reporting; and. 5. Registrant's other certifying officer(s) and I have disclosed to Registrant's auditors and the audit committee of 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 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 Registrant's internal control over financial reporting. Date: September 7, 2005 Signature: /s/ Barbara A. Kelley ------------------------- Chief Financial Officer EX-99.906CERT 3 a2162537zex-99_906cert.txt EXHIBIT 99.906CERT Exhibit 99.906Cert PACIFIC ADVISORS FUND EXHIBIT 12(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. Registrant's periodic report on Form N-CSR for the period ended June 30, 2005 (the "Form N-CSR") 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-CSR fairly presents, in all material respects, the financial condition and results of operations of 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-CSR filed with the Commission. Date: September 7, 2005 Pacific Global Fund Inc. d/b/a Pacific Advisors Fund Inc. 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 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Registrant and will be retained by Registrant and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----