-----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, ItFIJxzrTTX2Ir/3dnn/kYp1u8p+ZNkdYN6QdqepSgDt61Qv8ZDqFAyb/tZONYFg N+vgFQXjyIs/f1VosZiYlQ== /in/edgar/work/20000629/0000950115-00-000860/0000950115-00-000860.txt : 20000920 0000950115-00-000860.hdr.sgml : 20000920 ACCESSION NUMBER: 0000950115-00-000860 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 1838 INVESTMENT ADVISORS FUNDS CENTRAL INDEX KEY: 0000933996 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 232794406 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-08902 FILM NUMBER: 664966 BUSINESS ADDRESS: STREET 1: FIVE RADNOR CORPORATE CENTER SUITE 320 STREET 2: 100 MATSONFORD ROAD CITY: RADNOR STATE: PA ZIP: 19087 BUSINESS PHONE: 6102934300 MAIL ADDRESS: STREET 1: FIVE RADNOR CORPORATE CENTER SUITE 320 STREET 2: 100 MATSONFORD ROAD CITY: RADNOR STATE: PA ZIP: 19087 N-30D 1 0001.txt SEMI-ANNUAL REPORT 1838 INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- FELLOW SHAREHOLDER: The Fund's total return for the six-month period ended April 30, 2000 was 15.8%, while the net total return for the Morgan Stanley Capital International Europe, Australia and Far East Index (the "EAFE Index") for this period was 6.7%(1). During the six-month period, the EAFE Growth Index outperformed the EAFE Value Index by 12.5% points(2). At the very start of trading this year, January 3, 2000, the EAFE Index reached an all-time high, after which it corrected some 6% through the end of April, mostly as a result of strength in the reporting currency of the Fund, the US dollar, against the Euro, and on profit taking in telecommunication, media and technology stocks. SECTORS: Following the spectacular performance during the second half of last year, telecommunication and technology stocks were again among the biggest winners for much of the first quarter of this year. The Fund benefited from the holdings in market leaders such as Nortel Networks, Nokia, NEC, Taiwan Semiconductor and Philips in the technology area, in which the Fund was over-weighted, and Mannesmann, MobilCom, China Telecom, Vivendi, and Hutchison Whampoa in telecommunications. The Fund also profited from energy stocks such as Schlumberger and Total Fina Elf, with oil prices experiencing a sustained climb. Nomura Securities, the leading Japanese securities broker, Elan and Takeda Chemicals, two pharmaceutical holdings, also posted spectacular returns. Retail, construction, car and bank stocks overall were down as much as 30% during the first months of the year, but recovered during March. With such varying performances between sectors and industries,--and within these--with big swings during the six-month period, your broadly diversified portfolio came through with a very solid performance. COUNTRY PERFORMANCES: Among the larger international markets, Continental European markets performed well, with the German and French indices both posting about 15% total returns for the six-month period ended April 30, 2000, followed by Italy at 9%. Company earnings generally beat consensus estimates, on strong export demand, partly as a result of weakness of the Euro. Rising interest rates hit the U.K. market, which was among the worst performers in Europe, with a negative return of 3% particularly hard (all return numbers are measured in US dollars). The Japanese equity market ended the year 1999 on a very strong note, after which profit taking, primarily by foreign investors, reduced the return for the six-month period to 3%. Compared with the benchmark, the Fund had an above benchmark weighting in non-Japan - ---------- (1) Past performance is no guarantee of future results. The 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. Please bear in mind that investing in foreign securities can involve special risks such as currency fluctuation, less extensive regulation of foreign brokers and possible political instability. The Fund's returns assume the reinvestment of all distributions. The MSCI EAFE Index is an unmanaged stock market index without any associated expenses and the returns assume reinvestment of all net dividends. You cannot invest directly in an index. (2) The EAFE Growth Index and the EAFE Value Index are subsets of the EAFE Index. All securities in the EAFE Index are classified as either growth or value securities by using price/book value (P/BV) ratios. Securities with low P/BV ratios are assigned to the EAFE Value Index and securities with high P/BV ratios are assigned to the EAFE Growth Index. 1 1838 INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- Asia (mostly in telecom and technology), and a slightly above benchmark weighting in continental Europe. The Fund had slightly below benchmark exposure to Japan (emphasizing specialty finance and electronics) and to the U.K. In emerging markets, the Fund fared well with holdings in leaders such as Taiwan Semiconductors, China Telecom and SK Telecom. These stock prices doubled or tripled between the end of October and the end of February, but lost about a third of their market values since. OUTLOOK: At present, the markets are very volatile with rising short term interest rates and inflation offsetting the support from increasing corporate profits. The dollar has been surprisingly strong on the back of the US economic performance being much better than that of Japan and Europe during the last years. While there are good reasons to expect equity markets to continue to do well over the next years overseas, as corporate management is more focused than ever on the bottom line results which are also supported by accelerating economic growth, near term results are quite uncertain. We will try to increase exposure to companies that benefit from overseas regional economic growth recoveries, rather than just from US or US dollar boosted earnings. Sincerely, /s/ Hans van den Berg ---------------------------------- Hans van den Berg Vice President & Portfolio Manager May 22, 2000 2 1838 INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2000 - --------------------------------------------------------------------------------
Value Industry Shares (Note 2) -------- --------- ------------ COMMON STOCK -- 98.05% AUSTRALIA -- 1.78% Broken Hill Proprietary Co. Mining............................ 108,000 $ 1,162,052 Woodside Petroleum Ltd. Oil & Gas......................... 129,600 800,833 ------------ 1,962,885 ------------ CANADA -- 2.58% Nortel Networks Corp. Information Technology Hardware... 25,000 2,831,250 ------------ FINLAND -- 1.88% Nokia Corp. -- Sponsored ADR Information Technology Hardware... 36,400 2,070,250 ------------ FRANCE -- 10.90% Accor SA Leisure, Entertainment & Hotels... 20,000 744,487 AXA, Inc. Insurance......................... 8,800 1,307,891 Christian Dior Household Goods & Textiles........ 6,400 1,525,059 Cap Gemini SA Software & Computer Services...... 5,400 1,062,876 Construction & Building Lafarge Materials....................... 11,470 952,175 Schlumberger, Ltd. Oil & Gas Services................ 15,200 1,163,750 Societe Generale (A Shares) Banks............................. 8,434 1,750,743 Total SA (B Shares) Oil & Gas......................... 13,000 1,977,128 Vivendi Diversified Industrials........... 15,200 1,506,980 ------------ 11,991,089 ------------ GERMANY -- 6.96% BMW AG Automobiles....................... 46,400 1,236,741 Fresenius Medical Care Health............................ 21,600 1,594,314 Henkel KGAA Personal Care & Household Products........................ 15,000 781,848 Karstadt AG General Retailers................. 18,000 549,481 Schering AG Pharmaceuticals................... 9,700 1,374,476 MobilCom AG Telecommunication Services........ 17,200 2,115,910 ------------ 7,652,770 ------------ HONG KONG -- 5.22% China Telecom HK Ltd. -- Sponsored ADR* Telecommunication Services........ 7,600 1,114,825 Giordano International Ltd. Household Goods & Textiles........ 972,000 1,591,049 HSBC Holdings plc Banks............................. 140,804 1,572,684 Hutchison Whampoa Ltd. Diversified Industrials........... 100,000 1,457,146 ------------ 5,735,704 ------------
See notes to financial statements. 3 1838 INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000 - --------------------------------------------------------------------------------
Value Industry Shares (Note 2) -------- --------- ------------ IRELAND -- 2.41% Allied Irish Banks -- Sponsored ADR Banks............................. 44,300 $ 891,537 Elan Corp. plc -- Sponsored ADR * Pharmaceuticals................... 41,000 1,757,875 ------------ 2,649,412 ------------ ITALY -- 2.16% Pirelli SPA Automobiles....................... 486,000 1,166,949 Unicredito Italiano RNC Banks............................. 75,000 220,066 Unicredito Italiano SPA Banks............................. 243,000 987,589 ------------ 2,374,604 ------------ JAPAN -- 24.77% Advantest Corp. Information Technology Hardware... 6,200 1,417,553 Aiful Corp. Specialty & Other Finance......... 20,550 2,072,588 Bank of Tokyo-Mitsubishi Ltd. Banks............................. 55,000 709,415 Fast Retailing Company Ltd. General Retailers................. 3,100 1,365,348 Fanuc Ltd. Electronic & Electrical Equipment....................... 22,600 2,367,171 Fujitsu Support and Service Software & Computer Services...... 2,400 355,309 Honda Motor Co. Ltd. Automobiles....................... 24,000 1,072,588 Hoya Corp. Health............................ 17,000 1,730,280 KAO Corp. Personal Care & Household Products........................ 87,000 2,648,439 Kyocera Corp. Information Technology Hardware... 7,700 1,287,430 Minebea Co. Ltd. Electronic & Electrical Equipment....................... 100,000 1,221,374 Murata Manufacturing Co. Ltd. Information Technology Hardware... 8,000 1,554,476 NEC Corp. Information Technology Hardware... 71,000 1,931,437 Nomura Securities Co. Ltd. Specialty & Other Finance......... 70,000 1,761,740 Seven-Eleven Japan Co. Ltd. Food & Drug Retailers............. 12,000 1,476,752 Takeda Chemicals Inds. Pharmaceuticals................... 32,000 2,105,205 Takefuji Corp. Specialty & Other Finance......... 12,500 1,321,999 Tokio Marine & Fire Insurance Insurance......................... 86,000 838,714 ------------ 27,237,818 ------------ MEXICO -- 2.60% Telefonos De Mexico -- Sponsored ADR Telecommunication Services........ 23,500 1,382,094 Wal-Mart De Mexico * General Retailers................. 64,800 1,478,250 ------------ 2,860,344 ------------ NETHERLANDS -- 5.10% Aegon NV Life Assurance.................... 18,200 1,311,017 Akzo Nobel NV Chemicals......................... 27,900 1,144,831 ING Groep NV Banks............................. 22,269 1,217,956 Philips Electronics-NY Shares Electronic & Electrical Equipment....................... 43,400 1,936,725 ------------ 5,610,529 ------------
See notes to financial statements. 4 1838 INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000 - --------------------------------------------------------------------------------
Value Industry Shares (Note 2) -------- --------- ------------ NORWAY -- 0.77% Royal Caribbean Cruises Ltd. Leisure, Entertainment & Hotels... 40,500 $ 842,906 ------------ SINGAPORE -- 2.10% DBS Group Holdings Banks............................. 102,855 1,415,574 Singapore Airlines, Ltd. Transport......................... 86,200 893,552 ------------ 2,309,126 ------------ SOUTH KOREA -- 2.53% Samsung Electronics Electronic & Electrical Equipment....................... 5,600 1,513,854 SK Telecom Co. Ltd. Telecommunication Services........ 4,790 1,273,305 ------------ 2,787,159 ------------ SPAIN -- 2.81% Banco Bilboa Vizcaya Argentaria Banks............................. 81,000 1,107,162 Telefonica SA -- Sponsored ADR Telecommunication Services........ 29,981 1,986,241 ------------ 3,093,403 ------------ SWEDEN -- 2.83% ABB Ltd. * Engineering & Machinery........... 11,995 1,339,774 Electrolux AB (B Series) Household Goods & Textiles........ 61,600 1,042,377 Svenska Cellulosa AB (B Shares) Forestry & Paper.................. 38,500 731,040 ------------ 3,113,191 ------------ SWITZERLAND -- 4.86% Adecco SA -- Registered Shares Support Services.................. 2,700 2,220,575 Nestle SA -- Sponsored ADR Food Producers & Processors....... 12,300 1,076,250 Roche Holding AG Genuss Pharmaceuticals................... 90 942,110 Zurich Allied AG Insurance......................... 2,600 1,107,701 ------------ 5,346,636 ------------ TAIWAN -- 1.54% Taiwan Semiconductor -- SP Sponsored ADR Information Technology Hardware... 32,400 1,694,925 ------------ UNITED KINGDOM -- 14.25% Barratt Developments plc Construction & Building Materials....................... 257,000 1,003,373 Bass plc Beverages......................... 60,000 705,568 BP Amoco Oil & Gas......................... 235,958 2,047,364 Imperial Chemicals Inds. plc Chemicals......................... 117,800 1,009,226 Kingfisher plc General Retailers................. 92,147 762,774
See notes to financial statements. 5 1838 INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000 - --------------------------------------------------------------------------------
Value Industry Shares (Note 2) -------- --------- ------------ UNITED KINGDOM -- (CONTINUED) Misys plc Software & Computer Services...... 92,606 $ 1,067,986 Pearson plc Media & Photography............... 41,600 1,428,199 Prudential Corp. plc Life Assurance.................... 65,000 1,011,526 Royal Bank of Scotland Group plc Banks............................. 55,216 864,452 TI Group plc Engineering & Machinery........... 170,600 933,007 Shell Transport & Trading Oil & Gas......................... 35,100 1,693,575 Vodafone Airtourch plc Telecommunication Services........ 683,989 3,141,348 ------------ 15,668,398 ------------ TOTAL COMMON STOCK (Cost $84,798,125)....................................... 107,832,399 SHORT-TERM INVESTMENTS -- 2.99% A.I.M. Liquid Asset Portfolio (Cost $3,287,216)....................................................... 3,287,216 3,287,216 ------------ TOTAL INVESTMENTS (Cost $88,085,341)+ -- 101.04%............................ $111,119,615 OTHER ASSETS AND LIABILITIES, NET -- (1.04%)................................ (1,147,859) ------------ NET ASSETS -- 100.00%....................................................... $109,971,756 ============
MARKET SECTOR DIVERSIFICATION (UNAUDITED) As a Percentage of Total Common Stocks Resources -- 8.20% Cyclical Services -- 9.54% Basic Industries -- 4.49% Non-Cyclical Services -- 11.58% General Industries -- 11.38% Information Technology -- 18.95% Cyclical Consumer Goods -- 7.08% Financials -- 15.13% Non-Cyclical Consumer Goods -- 13.65% * Non-income Producing + The cost for federal income tax purposes was $88,085,341. The aggregate gross unrealized appreciation for all securities in which there was an excess of market value over tax cost of $31,908,452, and aggregate gross unrealized depreciation for all securities for which there was an excess of tax cost over market value of $8,874,178. ADR -- American Depository Receipt See notes to financial statements. 6 1838 FIXED INCOME FUND - -------------------------------------------------------------------------------- TO THE SHAREHOLDER: The beginning of the new millennium continued as a tale of two cities, depending on where you were on the yield curve. The front end saw yields move upward as the Federal Reserve consecutively raised rates 25 basis points at all three of their meetings during the first half of the Fund's fiscal year. The additional tightenings in monetary policy brought the Federal Funds rate to 6.0%. The move on the long end was a result of technical factors (government surpluses and buy backs of long dated Treasuries) defying the strength in the economy. The divergence between the action of the different maturities of the yield curve caused the curve between 2 year and 30 year Treasuries to invert as much as 70 basis points during the six-month period ended April 30, 2000. Spread product (corporates, mortgages and agencies) had a tough time with spreads reaching levels that rivaled those of the global financial meltdown of 1998 and the recession of the early 1990's. Reasons for the spread widening were varied, including equity market volatility, Federal Reserve on the move, inverted yield curve and less risk tolerance on both sides of the "street". The Fund will maintain a neutral to slightly short duration until signs of slower growth emerge and the Fed appears to be done raising rates. We will also stay with our overweight in spread product, as we believe spreads will compress and valuations will normalize throughout the balance of the year. As of April 30, 2000, the Fund's portfolio composition, as compared to the Lehman Aggregate Bond Index ("Index"), was as follows: 1838 Fixed Lehman Aggregate Income Fund Bond Index ----------- ---------------- Corporate Bonds........................ 32% 22% Mortgage-Backed........................ 39% 36% Asset-Backed........................... 8% 1% Agencies............................... 10% 8% Treasuries............................. 11% 33% The total return for the 1838 Fixed Income Fund for the six-month period ended April 30, 2000 was 0.63% versus 1.41% for the Index. The Fund's cumulative total return since inception (September 2, 1997) to April 30, 2000 was 10.69% versus the Index's return for the same period of 14.76%(1). Sincerely, /s/ Clifford D. Corso ---------------------------------- Clifford D. Corso Vice President & Portfolio Manager May 22, 2000 (1) Past performance is no guarantee of future results. The 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. The Fund's returns assume the reinvestment of all distributions. The Lehman Aggregate Bond Index is an unmanaged investment grade bond index without any associated expenses and the returns assume reinvestment of all interest income. You cannot invest directly in an index. 7 1838 FIXED INCOME FUND SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2000 - --------------------------------------------------------------------------------
Moody's/S&P Principal Value Rating* Amount (Note 2) ----------- --------- -------- CORPORATE BONDS -- 30.78% BANKS -- 7.62% Bank of America, 7.80%, 02/15/10 ....................... Aa3/A $ 1,710,000 $ 1,706,105 Royal Bank of Scotland, 8.817%, 03/31/49 ............... A1/A- 2,485,000 2,500,775 Wells Fargo Co., 7.20%, 05/01/2003 ..................... AA2/A+ 2,680,000 2,659,364 Westdeutsche Landesbank NY, 6.05%, 01/15/09 ............ Aa1/AA+ 3,525,000 3,090,064 ------------ 9,956,308 ------------ FINANCIAL -- 9.60% CIT Group Inc., 7.08%, 03/15/03......................... A1/A+ 2,920,000 2,896,871 Ford Motor Credit Corp., 7.45%, 07/16/31................ A2/A 2,330,000 2,215,434 Household Finance Corp., 7.875%, 03/01/07............... A2/A 1,220,000 1,210,062 Morgan Stanley Dean Witter, 7.125%, 01/15/03............ Aa3/A+ 1,950,000 1,926,684 Paine Webber Group, 7.59%, 05/02/02..................... Baa1/BBB+ 2,590,000 2,569,280 PNC Funding Corp., 6.125%, 09/01/03..................... Aa3/BBB+ 1,790,000 1,709,525 ------------ 12,527,856 ------------ INDUSTRIAL & MISCELLANEOUS -- 13.56% Avon Products Inc., 7.15%, 11/15/09..................... A2/A 90,000 84,727 Avon Products Inc., 7.15%, 11/15/09, 144A*.............. A2/A 2,310,000 2,089,921 Conoco Inc., 6.95%, 04/15/29............................ A3/A- 1,193,000 1,070,981 Consolidated Freightways, 8.875%, 05/01/10.............. Baa3/BBB 2,820,000 2,780,475 IBM Corp., 6.50%, 01/15/28.............................. A1/A+ 1,105,000 973,203 Lockheed Martin Corp., 8.20%, 12/01/09.................. Baa2/BBB- 2,250,000 2,202,525 Tyco Int'l. Group, 6.25%, 06/15/03...................... Baa1/A- 2,250,000 2,123,213 Tyco Int'l. Group, 7.00%, 06/15/28...................... Baa1/A- 1,187,000 1,013,913 United Dominion Inds., 8.625%, 03/15/03................. Baa2/BBB 2,790,000 2,775,866 Yosemite Sec. Trust, 8.25%, 11/15/04, 144A*............. Baa2/BBB+ 2,615,000 2,580,898 ------------ 17,695,722 ------------ TOTAL CORPORATE BONDS (Cost $40,782,537)............................................ 40,179,886 ------------ ASSET BACKED SECURITIES -- 7.85% Bear Stearns CMS, Ser. 1999-WF2, Cl. A2, 7.08%, 06/15/09.............................................. Aaa/AAA 2,345,000 2,255,810 Citibank Credit Card Master Trust, Ser. 1999-2, Cl. A, 5.875%, 03/10/11...................................... Aaa/AAA 3,515,000 3,142,305 Navistar Financial Corp. Owner Trust, Ser. 2000-A, Cl. A3, 7.20%, 05/17/04................................... Aaa/AAA 2,330,000 2,326,924 Union Acceptance Corp., Ser. 1999-D, Cl. A4, 6.85%, 02/08/06.............................................. Aaa/AAA 2,555,000 2,519,843 ------------ TOTAL ASSET BACKED SECURITIES (Cost $10,594,957).................................... 10,244,882 ------------
See notes to financial statements. 8 1838 FIXED INCOME FUND SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000 - --------------------------------------------------------------------------------
Moody's/S&P Principal Value Rating* Amount (Note 2) ----------- --------- -------- MORTGAGE BACKED SECURITIES -- 38.49% FGCI, Pool #E00617, 5.50%, 01/01/14..................... Aaa/AAA $ 1,043,120 $ 958,334 FGCI, Pool #E00765, 6.50%, 12/01/14..................... Aaa/AAA 1,973,836 1,891,507 FGLMC, Pool #D85515, 6.50%, 01/01/28.................... Aaa/AAA 1,944,065 1,817,961 FGLMC, Pool #C29190, 6.50%, 07/01/29.................... Aaa/AAA 2,179,321 2,036,902 FGLMC, Pool #C30260, 7.50%, 08/01/29.................... Aaa/AAA 1,258,723 1,233,433 FHLMC, Pool #G10557, 6.50%, 07/01/11.................... Aaa/AAA 1,550,990 1,494,317 FHLMC, Pool #A00930, 10.00%, 05/01/20................... Aaa/AAA 28,842 30,544 FHLMC, Pool #C80342, 6.50%, 09/01/25.................... Aaa/AAA 1,322,427 1,239,211 FHLMC, Pool #C00967, 8.50%, 02/01/30.................... Aaa/AAA 2,175,106 2,209,831 FNCL, Pool #482515, 5.50%, 01/01/14..................... Aaa/AAA 329,239 302,048 FNCL, Pool #252381, 5.50%, 04/01/14..................... Aaa/AAA 139,821 128,202 FNCL, Pool #535003, 7.00%, 11/01/14..................... Aaa/AAA 1,882,230 1,839,475 FNCL, Pool #498610, 6.00%, 05/01/29..................... Aaa/AAA 1,943,641 1,760,793 FNCL, Pool #491805, 6.50%, 06/01/29..................... Aaa/AAA 2,000,198 1,867,413 FNCL, Pool #515959, 7.50%, 11/01/29..................... Aaa/AAA 4,471,133 4,378,679 FNCL, Pool #522898, 8.00%, 01/01/30..................... Aaa/AAA 931,967 931,076 FNCL, Pool #526025, 8.00%, 01/01/30..................... Aaa/AAA 1,962,225 1,959,896 FNMA, Pool #250890, 7.00%, 04/01/04..................... Aaa/AAA 1,033,447 1,020,196 FNMA, Pool #303728, 6.00%, 01/01/11..................... Aaa/AAA 1,417,791 1,344,209 FNMA, Pool #190275, 8.00%, 11/01/26..................... Aaa/AAA 1,660,042 1,660,604 FNMA, Pool #481429, 6.00%, 01/01/29..................... Aaa/AAA 1,963,286 1,780,105 FNMA, Pool #487830, 6.00%, 03/01/29..................... Aaa/AAA 3,531,753 3,199,504 FNMA, Pool #TBA, 8.00%, 02/15/30........................ Aaa/AAA 2,995,628 2,996,769 GNMA, Pool #6937, 8.50%, 12/15/05....................... Aaa/AAA 3,895 3,966 GNMA, Pool #780374, 7.50%, 12/15/23..................... Aaa/AAA 1,031,525 1,017,864 GNMA, Pool #2038, 8.50%, 07/20/25....................... Aaa/AAA 142,541 144,433 GNMA, Pool #417239, 7.00%, 02/15/26..................... Aaa/AAA 2,076,106 1,999,662 GNMA, Pool #443623, 6.50%, 02/15/28..................... Aaa/AAA 1,955,688 1,833,626 GNMA, Pool #448178, 6.50%, 03/15/28..................... Aaa/AAA 193,110 181,159 GNMA, Pool #462556, 6.50%, 02/15/28..................... Aaa/AAA 2,626,060 2,463,546 GNMA, Pool #491223, 7.00%, 03/15/29..................... Aaa/AAA 2,981,589 2,869,091 GNMA, Pool #509609, 7.00%, 07/15/29..................... Aaa/AAA 1,712,753 1,648,129 ------------ TOTAL MORTGAGE BACKED SECURITIES (Cost $51,572,262)................................. 50,242,485 ------------
See notes to financial statements. 9 1838 FIXED INCOME FUND SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000 - --------------------------------------------------------------------------------
Principal Value Amount (Note 2) --------- -------- U.S. GOVERNMENT AGENCY OBLIGATIONS** -- 9.57% FHLMC, 5.00%, 01/15/04.................................. $ 4,600,000 $ 4,263,818 FNMA, 7.25%, 01/15/10................................... 1,675,000 1,667,851 FNMA, 7.125%, 02/15/05.................................. 3,420,000 3,399,713 FNMA, 7.125%, 03/15/07.................................. 3,195,000 3,157,603 ------------ TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $12,584,912)......................... 12,488,985 ------------ U.S. TREASURY OBLIGATIONS** -- 10.56% U.S. Treasury Notes, 6.125%, 12/31/01................... 970,000 961,512 U.S. Treasury Notes, 4.25%, 11/15/03.................... 65,000 60,308 U.S. Treasury Notes, 5.875%, 11/15/04................... 5,830,000 5,676,962 U.S. Treasury Notes, 6.50%, 02/15/10.................... 1,815,000 1,851,300 U.S. Treasury Bonds, 8.125%, 08/15/19................... 1,170,000 1,405,097 U.S. Treasury Bonds, 6.125%, 11/15/27................... 1,220,000 1,208,182 U.S. Treasury Bonds, 6.125%, 08/15/29................... 2,620,000 2,626,550 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost $13,733,698).................................. 13,789,911 ------------ Shares ----------- SHORT-TERM INVESTMENTS -- 1.77% SEI Daily Income Trust Prime Obligation (Cost $2,314,415)..................................... 2,314,415 2,314,415 ------------ TOTAL INVESTMENTS (Cost $131,582,781)+ -- 99.02%.......................................... $129,260,564 OTHER ASSETS AND LIABILITIES, NET -- 0.98%................................................ 1,274,902 ------------ NET ASSETS -- 100%........................................................................ $130,535,466 ============
- ---------- * Resale restricted to institutional buyers. ** While no ratings are shown for U.S. Government Agency Obligations and U.S. Treasury Obligations, they are considered to be of the highest quality, comparable to Moody's AAA rating and S&P's Aaa rating. + The cost for federal income tax purposes was $131,635,196. The aggregate gross unrealized appreciation for all securities for which there was an excess of market value over tax cost of $146,136, and aggregate gross unrealized depreciation for all securities for which there was an excess of tax cost over market value of $2,520,768. TBA Securities purchased on a forward commitment basis with an approximate principal amount and no definitive maturity date. The actual principal and maturity date will be determined upon settlement. See notes to financial statements. 10 1838 LARGE CAP EQUITY FUND - -------------------------------------------------------------------------------- TO THE SHAREHOLDER: The 1838 Large Cap Equity Fund's total return was 10.13% for the six-month period ended April 30, 2000, compared with a 7.17% return for the Standard & Poor's 500 Stock Index(1). The Fund's total return since commencement of operations (September 29, 1999) is 16.85% versus 15.28% for the S&P 500 Index over the same period. We are pleased with this good start, especially given the increased stock market volatility experienced along the way. The Fund's weightings in the various industrial sectors stayed very close to those of the Index, leaving all of this positive return to come from good stock selection. It is important to note the S&P 500's wide disparity in returns generated by the various industry sectors. At the extreme, S&P Tech stocks rose 37%, while the Index's Consumer Staples stocks fell almost 18%! It is impossible to predict such movements on a consistent basis, and so our effort is placed on picking stocks that can outperform in each sector category. Our analysts were able to add value through superior stock selection in five out of eight sectors, with strong excess returns coming in Healthcare, Technology and Energy. Medtronic, Oracle and Transocean Sedco Forex, for example, have been successful investments in each respective sector. On the other hand, we struggled in the Consumer Cyclicals and Deregulated Industries, underperforming the S&P in each case. Among the holdings that held us back were Carnival Corp., McDonald's, SBC Communications and Worldcom. While we cannot expect to outperform in each sector all the time, it is very important to manage those investments that detract from good performance. We have an established sale discipline that is consistently enforced. Of the names above, McDonald's has been eliminated from the portfolio, and replaced with another Consumer Cyclical investment with better prospects, CVS. There have been significant shifts in investor sentiment during the past few months, much of it in reaction to steady pressure by the Federal Reserve to raise interest rates. At this writing, all major stock indices are in modest negative territory, year to date. The mood has changed from one of euphoria (the 20% plus returns logged annually in the late nineties), to a lingering doubt regarding the ultimate impact of these rate increases. We have faith that Alan Greenspan manages the economy first, and that his goals, controlled real growth and maintained "full" employment, will be realized and help produce positive returns for the remainder of the year. Sincerely, /s/ George W. Gephart, Jr. ------------------------------------ George W. Gephart, Jr. Vice President & Portfolio Manager May 22, 2000 (1) Past performance is no guarantee of future results. The 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. The Fund's returns assume the reinvestment of all distributions. The S&P 500 Index is an unmanaged stock market index without any associated expenses and the returns assume reinvestment of all dividends. You cannot invest directly in an index. 11 1838 LARGE CAP EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2000 - --------------------------------------------------------------------------------
Value Shares (Note 2) --------- ------------ COMMON STOCK -- 98.76% Basic Industries -- 10.60% Avery Dennison Corp........................................ 3,300 $ 216,562 E.I. Dupont de Nemours & Co................................ 2,600 123,337 General Electric Co........................................ 3,100 487,475 Illinois Tool Works........................................ 2,800 179,375 Tyco International Ltd..................................... 4,900 225,094 ------------ 1,231,843 ------------ Consumer Cyclical -- 11.36% Carnival Corp. (A Shares).................................. 6,200 154,225 CVS Corp................................................... 6,100 265,350 Ford Motor Co.............................................. 4,000 218,750 Interpublic Group of Cos................................... 4,700 192,700 Staples Inc.*.............................................. 8,100 154,406 Target Corp................................................ 1,700 113,156 Wal-Mart Stores Inc........................................ 4,000 221,500 ------------ 1,320,087 ------------ Consumer Staples -- 6.91% Coca Cola Co............................................... 3,300 155,306 Colgate-Palmolive Co....................................... 4,700 268,487 The Estee Lauder Cos. Inc. (A Shares)...................... 4,900 216,212 Safeway Inc.*.............................................. 3,700 163,263 ------------ 803,268 ------------ Energy -- 7.33% Chevron Corp............................................... 2,100 178,763 Exxon Mobil Corp........................................... 4,304 334,375 Schlumberger Ltd........................................... 2,400 183,750 Transocean Sedco Forex Inc................................. 3,310 155,570 ------------ 852,458 ------------ Financial -- 12.62% American International Group............................... 4,300 471,656 Citigroup Inc.............................................. 6,500 386,344 Fifth Third Bancorp........................................ 3,100 195,687 Firstar Corp............................................... 4,400 109,450 Wells Fargo Co............................................. 7,400 303,863 ------------ 1,467,000 ------------
See notes to financial statements. 12 1838 LARGE CAP EQUITY FUND SCHEDULE OF INVESTMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000 - --------------------------------------------------------------------------------
Value Shares (Note 2) --------- ------------ Healthcare -- 10.31% Medtronic Inc.................................................. 6,200 $ 322,012 Merck & Co. Inc................................................ 2,800 194,600 Pharmacia Corp................................................. 3,927 196,105 Schering-Plough Corp........................................... 4,700 189,469 Warner-Lambert Co.............................................. 2,600 295,912 ------------ 1,198,098 ------------ Technology -- 31.14% America Online Inc.*........................................... 2,800 167,475 Applied Materials Inc.*........................................ 2,200 223,987 Cisco Systems Inc.*............................................ 8,500 589,289 Dell Computer Corp.*........................................... 5,100 255,638 EMC Corp.*..................................................... 1,700 236,194 Intel Corp..................................................... 4,100 519,931 Lucent Technologies Inc........................................ 4,400 273,625 Microsoft Corp.*............................................... 4,700 327,825 Nortel Networks Corp........................................... 2,400 271,800 Oracle Systems Corp.*.......................................... 2,900 231,819 Sun Microsystems Inc.*......................................... 2,500 229,844 Texas Instruments Inc.......................................... 1,800 293,175 ------------ 3,620,602 ------------ Deregulated Industries -- 8.49% Bell Atlantic Corp............................................. 2,900 171,825 SBC Communications Inc......................................... 8,200 359,263 Sprint Corp.................................................... 2,100 129,150 Worldcom Inc.*................................................. 7,200 327,150 ------------ 987,388 ------------ TOTAL COMMON STOCKS (Cost $10,982,180)....................... 11,480,744 ------------ SHORT-TERM INVESTMENTS -- 1.23% SEI Daily Income Trust Prime Obligation (Cost $143,537)........ 143,537 143,537 ------------ TOTAL INVESTMENTS (Cost $11,125,717)+ -- 99.99%.................... $ 11,624,281 OTHER ASSETS AND LIABILITIES, NET -- 0.01%......................... 1,053 ------------ NET ASSETS -- 100%................................................. $ 11,625,334 ============
* Non-income producing security. + The cost for federal income tax purposes was $11,125,717. The aggregate gross unrealized appreciation for all securities in which there was an excess of market value over tax cost of $1,207,467, and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over market value of $708,903. See notes to financial statements. 13 1838 INVESTMENT ADVISORS FUNDS STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 2000 - --------------------------------------------------------------------------------
International Fixed Income Large Cap Equity Fund Fund Equity Fund -------------------------------------------- ASSETS: Investments, at value (identified cost $88,085,341, $131,582,781 and $11,125,717 respectively) (Note 2)................................... $ 111,119,615 $129,260,564 $11,624,281 Receivables: Dividends and interest............................................... 297,489 1,581,243 9,820 Investment securities sold........................................... -- 2,345,217 -- Reimbursement due from advisor....................................... -- -- 2,462 Other assets........................................................... 11,609 5,121 1,132 -------------------------------------------- Total assets..................................................... 111,428,713 133,192,145 11,637,695 -------------------------------------------- LIABILITIES: Management fees due to advisor (Note 4).............................. 66,931 41,039 -- Due to affiliates (Note 4)........................................... 13,510 13,341 6,175 Payable for investment securities purchased.......................... 1,352,660 2,590,000 -- Other accrued expenses............................................... 23,856 12,299 6,186 -------------------------------------------- Total liabilities................................................ 1,456,957 2,656,679 12,361 -------------------------------------------- NET ASSETS............................................................. $ 109,971,756 $130,535,466 $11,625,334 ============================================ NET ASSETS CONSIST OF: Shares of beneficial interest (par $0.001)............................. $ 6,839 $ 13,679 $ 998 Additional capital paid-in............................................. 77,075,250 136,367,307 10,856,405 Distribution in excess of net investment income........................ -- (8,498) -- Accumulated net investment income (loss)............................... (212,700) -- 8,226 Accumulated net realized gain (loss) on investments.................... 10,074,327 (3,514,805) 261,141 Net unrealized appreciation (depreciation) on: Investments.......................................................... 23,034,274 (2,322,217) 498,564 Translation of assets and liabilities in foreign currencies.......... (6,234) -- -- -------------------------------------------- NET ASSETS............................................................. $ 109,971,756 $130,535,466 $11,625,334 ============================================ Shares of beneficial interest outstanding.............................. 6,839,162 13,679,227 998,164 -------------------------------------------- NET ASSETS VALUE, offering and redemption price per share (Net assets/Outstanding shares of beneficial interest).................... $ 16.08 $ 9.54 $ 11.65 ============================================
See notes to financial statements. 14 1838 INVESTMENT ADVISORS FUNDS STATEMENTS OF OPERATIONS FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2000 (UNAUDITED) - --------------------------------------------------------------------------------
International Fixed Income Large Cap Equity Fund Fund Equity Fund -------------------------------------------- INVESTMENT INCOME: Dividends............................................................... $ 607,228 -- $ 32,092 Interest................................................................ 66,905 $3,974,714 8,693 Foreign taxes withheld.................................................. (72,470) -- -- -------------------------------------------- Total Investment Income............................................. 601,663 3,974,714 40,785 -------------------------------------------- EXPENSES: Investment advisory fees (Note 4)....................................... 378,139 282,043 25,700 Administration fee (Note 4)............................................. 30,251 33,845 7,466 Accounting fee (Note 4)................................................. 37,531 29,374 19,910 Custodian fees.......................................................... 22,875 3,775 4,632 Transfer agency fees (Note 4)........................................... 9,958 10,037 9,963 Trustees' fees (Note 4)................................................. 8,188 8,882 818 Audit fees.............................................................. 9,956 12,562 5,038 Legal fees.............................................................. 13,765 11,265 6,251 Registration fees....................................................... 10,663 12,115 6,927 Reports to shareholders................................................. 5,444 6,190 677 Amortization of organizational costs (Note 2)........................... 12,891 -- -- Other................................................................... 13,313 11,249 2,065 -------------------------------------------- Total expenses........................................................ 552,974 421,337 89,447 Advisory fee waived (Note 4)........................................ -- (81,962) (25,700) Reimbursement from advisor (Note 4)................................. -- -- (34,012) -------------------------------------------- Total expenses, net (Note 4)........................................ 552,974 339,375 29,735 -------------------------------------------- Net investment income............................................ 48,689 3,635,339 11,050 -------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain (loss) from: Investment transactions............................................... 10,074,358 (1,850,402) 261,655 Foreign currency transactions......................................... (261,398) -- -- -------------------------------------------- Total net realized gain (loss)...................................... 9,812,960 (1,850,402) 261,655 -------------------------------------------- Change in unrealized appreciation (depreciation) of: Investments........................................................... 3,831,760 (831,133) 254,713 Translation of assets and liabilities in foreign currencies........... (8,090) -- -- -------------------------------------------- Total change in unrealized appreciation (depreciation).............. 3,823,670 (831,133) 254,713 -------------------------------------------- Net gain (loss) on investments and foreign currency............... 13,636,630 (2,681,535) 516,368 -------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...................... $13,685,319 $ 953,804 $527,418 ============================================
See notes to financial statements. 15 1838 INVESTMENT ADVISORS FUNDS STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
International Fixed Income Large Cap Equity Fund Fund Equity Fund+ ---------------------------------------------------- FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2000 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income........................................... $ 48,689 $ 3,635,339 $ 11,050 Net realized gain (loss) from investment and foreign currency transactions.................................................. 9,812,960 (1,850,402) 261,655 Change in unrealized appreciation (depreciation) of investments and foreign currency.......................................... 3,823,670 (831,133) 254,713 --------------------------------------------------- Net increase in net assets resulting from operations.............. 13,685,319 953,804 527,418 --------------------------------------------------- Distributions to shareholders: Net investment income........................................... (7,576) (3,864,041) (6,623) Net realized gains.............................................. (4,661,343) -- (15,233) --------------------------------------------------- Total Distributions........................................... (4,668,919) (3,864,041) (21,856) --------------------------------------------------- Increase in net assets from Fund share transactions (Note 5)...... 14,408,330 39,224,977 6,196,477 --------------------------------------------------- Increase in net assets............................................ 23,424,730 36,314,740 6,702,039 NET ASSETS: Beginning of period............................................. 86,547,026 94,220,726 4,923,295 --------------------------------------------------- End of period................................................... $ 109,971,756 $130,535,466 $ 11,625,334 =================================================== FOR THE PERIOD ENDED OCTOBER 31, 1999 INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income........................................... $ 169,958 $ 4,502,938 $ 3,799 Net realized gain (loss) from investment and foreign currency transactions.................................................. 4,496,142 (1,593,120) 14,719 Change in unrealized appreciation (depreciation) of investments and foreign currency.......................................... 13,866,854 (2,308,516) 243,851 --------------------------------------------------- Net increase in net assets resulting from operations.............. 18,532,954 601,302 262,369 --------------------------------------------------- Distributions to shareholders: Net investment income........................................... -- (4,282,734) -- Net realized gains.............................................. (4,289,722) -- -- --------------------------------------------------- Total Distributions........................................... (4,289,722) (4,282,734) -- --------------------------------------------------- Increase in net assets from Fund share transactions (Note 5)...... 14,428,889 26,178,864 4,660,926 --------------------------------------------------- Increase in net assets............................................ 28,672,121 22,497,432 4,923,295 NET ASSETS: Beginning of period............................................. 57,874,905 71,723,294 -- --------------------------------------------------- End of period................................................... $ 86,547,026 $ 94,220,726 $ 4,923,295 ===================================================
+ The Large Cap Equity Fund commenced operations on September 29, 1999. See notes to the financial statements. 16 1838 INVESTMENT ADVISORS FUNDS FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each fiscal year or period and other performance information derived from the financial statements. It should be read in conjunction with the financial statements and notes thereto. INTERNATIONAL EQUITY FUND
For the Six Month Period Ended For the Fiscal Year or Period Ended October 31, April 30, 2000 ------------------------------------------------------ (Unaudited) 1999 1998 1997 1996 1995+ --------------------------------------------------------------------------- NET ASSET VALUE - BEGINNING OF PERIOD...... $ 14.57 $ 12.08 $ 11.99 $ 10.44 $ 9.61 $ 10.00 --------------------------------------------------------------------------- INVESTMENT OPERATIONS: Net investment income.................... 0.01 0.03 0.01 0.02 0.07 0.02 Net realized and unrealized gain (loss) on investments and foreign currency transactions........................... 2.27 3.34 0.75 1.57 0.80 (0.41) --------------------------------------------------------------------------- Total from investment operations..... 2.28 3.37 0.76 1.59 0.87 (0.39) --------------------------------------------------------------------------- DISTRIBUTIONS: From net investment income............... -- -- -- (0.04) (0.04) -- From net realized gain on investments.... (0.77) (0.88) (0.67) -- -- -- --------------------------------------------------------------------------- Total distributions.................. (0.77) (0.88) (0.67) (0.04) (0.04) -- --------------------------------------------------------------------------- NET ASSET VALUE - END OF THE PERIOD........ $ 16.08 $ 14.57 $ 12.08 $ 11.99 $ 10.44 $ 9.61 =========================================================================== TOTAL RETURN............................... 15.79%** 29.10% 6.90% 15.23% 9.11% (3.90)%** RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA: Expenses (net of fee waivers).......... 1.10%* 1.09% 1.13% 1.25% 1.25% 1.25%* Expenses (excluding fee waivers)....... N/A N/A N/A 1.44% 1.80% 2.60%* Net investment income.................. 0.10%* 0.23% 0.10% 0.28% 0.70% 1.02%* Portfolio turnover rate.................... 29.15% 48.71% 166.77% 92.33% 59.11% 42.21%* Net assets, end of period (in 000's)....... $109,972 $86,547 $ 57,875 $51,046 $41,209 $16,764
+ The International Equity Fund commenced operations on August 3, 1995. * Annualized. ** Total return not annualized. See notes to financial statements. 17 1838 INVESTMENT ADVISORS FUNDS FINANCIAL HIGHLIGHTS -- CONTINUED - -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each fiscal year or period and other performance information derived from the financial statements. It should be read in conjunction with the financial statements and notes thereto. FIXED INCOME FUND
For the Six-Months For the Fiscal Year or Period Ended Period Ended October 31, April 30, 2000 ---------------------------------- (Unaudited) 1999 1998 1997+ ------------------------------------------------------ NET ASSET VALUE - BEGINNING OF PERIOD........................... $ 9.81 $ 10.24 $ 10.27 $ 10.00 ------------------------------------------------------ INVESTMENT OPERATIONS: Net investment income......................................... 0.31 0.53 0.54 0.06 Net realized and unrealized gain (loss) on investments........ (0.25) (0.45) 0.08 0.21 ------------------------------------------------------ Total from investment operations.......................... 0.06 0.08 0.62 0.27 ------------------------------------------------------ DISTRIBUTIONS: From net investment income.................................... (0.33) (0.51) (0.59) -- Return of capital............................................. -- -- (0.04) -- From net realized gain on investments......................... -- -- (0.02) -- ------------------------------------------------------ Total distributions....................................... (0.33) (0.51) (0.65) -- ------------------------------------------------------ NET ASSET VALUE - END OF THE PERIOD............................. $ 9.54 $ 9.81 $ 10.24 $ 10.27 ====================================================== TOTAL RETURN.................................................... 0.63%** 0.79% 6.26% 2.70%** RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA: Expenses (net of fee waivers)(1).............................. 0.60%* 0.61% 0.75% 0.75%* Expenses (excluding fee waivers).............................. 0.75%* 0.73% 0.88% 2.12%* Net investment income......................................... 6.44%* 5.35% 5.60% 5.83%* Portfolio turnover rate......................................... 272.78% 834.18% 92.65% 39.12%* Net assets, end of period (in 000's)............................ $ 130,535 $ 94,221 $71,723 $32,537
+ The Fixed Income Fund commenced operations on September 2, 1997. * Annualized. ** Total return not annualized. (1) Effective March 1, 1999, 1838 Investment Advisors voluntarily agreed to waive its fees and/or reimburse the Fund so that the total operating expenses do not exceed 0.60% of average daily net assets. See notes to financial statements. 18 1838 INVESTMENT ADVISORS FUNDS FINANCIAL HIGHLIGHTS -- CONTINUED - -------------------------------------------------------------------------------- The following table includes selected data for a share outstanding throughout each fiscal year or period and other performance information derived from the financial statements. It should be read in conjunction with the financial statements and notes thereto. LARGE CAP EQUITY FUND
For the Six-Month Period Ended For the April 30, 2000 Period Ended (Unaudited) October 31, 1999+ ------------------------------------ NET ASSET VALUE - BEGINNING OF PERIOD................................... $ 10.61 $ 10.00 ---------------------------------- INVESTMENT OPERATIONS: Net investment income................................................. 0.01 0.01 Net realized and unrealized gain on investments....................... 1.06 0.60 ---------------------------------- Total from investment operations.................................. 1.07 0.61 ---------------------------------- DISTRIBUTIONS: From net investment income............................................ (0.01) -- From net realized gain on investments................................. (0.02) -- ---------------------------------- Total distributions............................................... (0.03) -- ---------------------------------- NET ASSET VALUE - END OF THE PERIOD..................................... $ 11.65 $ 10.61 ---------------------------------- ---------------------------------- TOTAL RETURN............................................................ 10.13%** 6.10%** RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA: Expenses (net of fee waivers)......................................... 0.75%* 0.75%* Expenses (excluding fee waivers)...................................... 2.26%* 4.98%* Net investment income................................................. 0.28%* 1.55%* Portfolio turnover rate................................................. 17.29% 5.58% Net assets, end of period (in 000's).................................... $ 11,625 $ 4,923
+ The Large Cap Equity Fund commenced operations on September 29, 1999. * Annualized. ** Total return not annualized. See notes to financial statements. 19 1838 INVESTMENT ADVISORS FUNDS NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) APRIL 30, 2000 - -------------------------------------------------------------------------------- NOTE 1 -- DESCRIPTION OF THE FUNDS The 1838 Investment Advisors Funds (the "Trust") was organized as a Delaware series business trust on December 9, 1994, and is an open-end, management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust's Agreement and Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest. The Trust consists of three Funds: the 1838 International Equity Fund, the 1838 Fixed Income Fund and the 1838 Large Cap Equity Fund (each a "Fund" and collectively, the "Funds"). The investment objectives of each Fund are set forth below. The 1838 International Equity Fund (the "International Fund") commenced operations on August 3, 1995. The Fund's investment objective is capital appreciation, with a secondary objective of income. The Fund seeks to achieve its objective by investing at least 65% of its total assets in a diversified portfolio of equity securities of issuers located in countries other than the United States. The 1838 Fixed Income Fund (the "Fixed Income Fund") commenced operations on September 2, 1997. The Fund's investment objective is maximum current income, with a secondary objective of growth. The Fund seeks to achieve its objective by investing, under normal circumstances, at least 65% of its assets in a diversified portfolio of fixed income securities. The 1838 Large Cap Equity Fund (the "Large Cap Fund") commenced operations on September 29, 1999. The Fund's investment objective is long-term total return. The Fund seeks to achieve its objective by investing at least 90% of its total assets in the common stock of U.S. companies with market capitalizations greater than $5 billion. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES Security Valuation. Each Fund's securities, except investments with remaining maturities of 60 days or less, are valued at the last quoted sales price on the security's principal exchange on that day. If there are no sales of the relevant security on such day, the security will be valued at the mean between the closing bid and asked price on that day, if any. Debt securities having a maturity of 60 days or less are valued at amortized cost. Securities for which market quotations are not readily available and all other assets will be valued at their respective fair value as determined in good faith by, or under procedures established by, the Board of Trustees. As of April 30, 2000, there were no securities valued by, or under procedures established by, the Board of Trustees. Federal Income Taxes. Each Fund is treated as a separate entity and intends to remain qualified as a "regulated investment company" under Subchapter M of the Internal Revenue Code of 1986 and to distribute all of its taxable income to its shareholders. Therefore, no federal income or excise tax provision is required. Dividends and Capital Gain Distributions. Distributions of net investment income and net realized gains are determined in accordance with income tax regulations that may differ from generally accepted accounting principles. The difference is primarily due to the differing treatments for foreign currency transactions for the International Fund. The Fixed Income Fund distributes net investment income monthly. All other distributions by each Fund will be made annually in December. Additional distributions may be made by each Fund to the extent necessary. 20 1838 INVESTMENT ADVISORS FUNDS NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000 - -------------------------------------------------------------------------------- NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) Deferred Organizational Costs. Costs incurred by the International Fund in connection with the initial registration and public offering of shares have been deferred and are being amortized on a straight-line basis over a five-year period beginning on the date that the Fund commenced operations. Foreign Currency Translations. The books and records of the International Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on the following basis: (i) market value of investment securities, assets and liabilities at the daily rates of exchange, and (ii) purchases and sales of investment securities, dividend and interest income and certain expenses at the rates of exchange prevailing on the respective dates of such transactions. The International Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Reported net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the International Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities, other than investments in securities, resulting from changes in exchange rates. Forward Foreign Currency Exchange Contracts. In connection with portfolio purchases and sales of securities denominated in a foreign currency, the International Fund may enter into forward foreign currency exchange contracts ("FFCEC"). Additionally, the International Fund may enter into these contracts to hedge certain foreign currency assets. Foreign currency exchange contracts are recorded at fair value. Certain risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts. Realized gains or losses arising from such transactions are included in net realized gain (loss) from foreign currency transactions. There were no FFCEC outstanding on April 30, 2000. Securities Transferred In-kind. Shareholders may periodically contribute marketable securities to a respective Fund, upon approval of the Fund's management, in exchange for capital shares of the respective Fund. The exchange is conducted on a taxable basis, whereby any unrealized appreciation or depreciation on the marketable securities on the date of transfer is recognized by the shareholder and the Fund's basis in the securities is the market value as of the date of transfer. The number of shares issued to the shareholder is calculated by dividing the market value of the marketable securities by the current net asset value per share of the respective Fund on the date of transfer. 21 1838 INVESTMENT ADVISORS FUNDS NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000 - -------------------------------------------------------------------------------- NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) Use of Estimates in the Preparation of Financial Statements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Other. Investment security transactions are accounted for on a trade date basis. The specific identification method is utilized for determining realized gain or loss on investments for both financial and federal income tax reporting purposes. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Interest income is recorded on an accrual basis. NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES During the six-month period ended April 30, 2000, purchases and sales of investment securities, other than short-term investments, were as follows:
International Fixed Income Large Cap Fund Fund Fund ------------- ------------- ------------ Purchases......................................... $36,503,638 $333,801,145 $ 7,581,842 Sales............................................. 28,431,084 297,014,926 1,239,623
Purchases and sales of U.S. Government securities, during the six-month period ended April 30, 2000, were as follows:
International Fixed Income Large Cap Fund Fund Fund ------------- ------------ ----------- Purchases......................................... $19,496,796 $126,450,057 $16,496,405 Sales............................................. 19,500,000 120,781,675 16,500,000
NOTE 4 -- ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES The Trust, on behalf of each Fund, employs 1838 Investment Advisors, Inc. (the "Investment Advisor"), a direct, wholly-owned subsidiary of MBIA, Inc., and registered investment adviser under the 1940 Act, to furnish investment advisory services to the Funds pursuant to an Investment Advisory Agreement with the Trust. The Investment Advisor supervises the investment of the assets of the Fund in accordance with each Fund's investment objective, policies and restrictions. The Trust pays the Investment Advisor a monthly fee at the following annual rates of each Fund's average daily net assets: 0.75% for the International Fund, 0.50% for the Fixed Income Fund and 0.65% for the Large Cap Fund. The Investment Advisor has voluntarily agreed to waive its advisory fee and/or reimburse each Fund monthly to the extent that the total operating expenses (excluding taxes, extraordinary expenses, brokerage commissions and interest) will exceed the following annual rates of each Fund's average daily net assets: 1.25% for the International Fund, 0.60% for the Fixed Income Fund and 0.75% for Large Cap Fund. This undertaking may be rescinded at any time in the future. 22 1838 INVESTMENT ADVISORS FUNDS NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000 - -------------------------------------------------------------------------------- NOTE 4 -- ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES -- (CONTINUED) The following table summarizes the advisory fees incurred by the Funds for the six-month period ended April 30, 2000:
Gross Advisory Fee Net Advisor Advisory Fee Waiver Advisory Fee Reimbursement ------------ ------------ ------------ ------------- International Fund....................... $378,139 $ -0- $378,139 $ -0- Fixed Income Fund........................ 282,043 81,962 200,081 -0- Large Cap Fund........................... 25,700 25,700 -0- 34,012
1838 Investment Advisors, Inc. ("1838") also serves as Administrator to the Trust pursuant to an Administration Agreement with the Trust on behalf of each Fund. As Administrator, 1838 is responsible for services such as financial reporting, compliance monitoring and corporate management. The Trust pays 1838 a monthly asset-based fee at the annual rate of 0.06% of each Fund's average daily net assets, with a minimum annual fee per Fund of $15,000. For the six-month period ended April 30, 2000, 1838's administration fees amount to $30,251, $33,845 and $7,466, for the International Fund, the Fixed Income Fund and the Large Cap Fund, respectively. MBIA Municipal Investors Services Corporation ("MBIA MISC"), a direct, wholly-owned subsidiary of MBIA, Inc., serves as Accounting Agent to the Trust. As Accounting Agent, MBIA MISC determines each Fund's net asset value per share and provides accounting services to the Funds pursuant to an Accounting Services Agreement with the Trust. The Trust pays MBIA MISC a monthly asset-based fee at the annual rate of $40,000, plus 0.03% of each Fund's average daily net assets in excess of $50 million for the Fixed Income Fund and the Large Cap Fund. The International Fund pays at the annual rate of $60,000, plus 0.03% of average daily net assets in excess of $50 million. For the six-month period ended April 30, 2000, MBIA MISC's accounting fees amount to $37,531, $29,374 and $19,910, for the International Fund, the Fixed Income Fund and the Large Cap Fund, respectively. MBIA MISC also serves as the Fund's transfer agent pursuant to a Transfer Agency Agreement with the Trust. For these services, MBIA MISC receives an annual fee per Fund of $20,000, and is reimbursed for out-of-pocket expenses. For the six-month period ended April 30, 2000, MBIA MISC's transfer agent fees amount to $9,958, $10,037 and $9,963, for the International Fund, the Fixed Income Fund and the Large Cap Fund, respectively. MBIA Capital Management Corporation (the "Distributor"), a direct, wholly-owned subsidiary of MBIA, Inc., entered into a Distribution Agreement with the Trust to assist in securing purchasers for shares of each Fund. The Distributor also directly or through its affiliates, provides investor support services. The Distributor receives no compensation for distributing the Funds' shares, except for reimbursement of its out-of-pocket expenses. The Trustees of the Trust who are "interested persons" of the Trust, the Investment Advisor or its affiliates and all personnel of the Trust or the Investment Advisor performing services related to research, statistical and investment activities are paid by the Investment Advisor or its affiliates. 23 1838 INVESTMENT ADVISORS FUNDS NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000 - -------------------------------------------------------------------------------- NOTE 5 -- FUND SHARE TRANSACTIONS At April 30, 2000, there were an unlimited number of shares of beneficial interest with a $0.001 par value, authorized. The following table summarizes the activity in shares of each Fund: INTERNATIONAL EQUITY FUND
For the Six-Month Period Ended April 30, 2000 For the Fiscal Year (Unaudited) Ended October 31, 1999 -------------------------- ------------------------- Shares Amount Shares Amount ---------- ----------- --------- ----------- Shares sold............................................ 1,217,176 $19,896,285 1,088,189 $13,964,098 Shares issued to shareholders in reinvestment of distributions..................................... 277,928 4,352,350 315,651 3,926,698 Shares redeemed........................................ (594,471) (9,840,305) (254,808) (3,461,907) ---------- ----------- --------- ----------- Net increase........................................... 900,633 $14,408,330 1,149,032 $14,428,889 =========== =========== Shares outstanding: Beginning of period............................... 5,938,529 4,789,497 ---------- --------- End of period..................................... 6,839,162 5,938,529 ========== =========
FIXED INCOME FUND
For the Six-Month Period Ended April 30, 2000 For the Fiscal Year (Unaudited) Ended October 31, 1999 -------------------------- ------------------------- Shares Amount Shares Amount ---------- ----------- --------- ----------- Shares sold............................................ 1,930,723 $18,622,444 2,618,322 $26,346,425 Shares issued in exchange for securities transferred in-kind (Note 2)..................................... 2,093,317 20,137,687 -- -- Shares issued to shareholders in reinvestment of distributions..................................... 362,244 3,480,841 387,326 3,867,673 Shares redeemed........................................ (311,639) (3,015,995) (405,513) (4,035,234) ---------- ----------- --------- ----------- Net increase........................................... 4,074,645 $39,224,977 2,600,135 $26,178,864 =========== =========== Shares outstanding: Beginning of period............................... 9,604,582 7,004,447 ---------- --------- End of period..................................... 13,679,227 9,604,582 ========== =========
24 1838 INVESTMENT ADVISORS FUNDS NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED APRIL 30, 2000 - -------------------------------------------------------------------------------- NOTE 5 -- FUND SHARE TRANSACTIONS -- (CONTINUED) LARGE CAP FUND
For the Six-Month Period Ended April 30, 2000 For the Fiscal Year (Unaudited) Ended October 31, 1999 -------------------------- ------------------------- Shares Amount Shares Amount ---------- ----------- --------- ----------- Shares sold............................................ 591,289 $ 6,847,680 471,281 $ 4,733,341 Shares issued to shareholders in reinvestment of distributions..................................... 1,965 21,856 -- -- Shares redeemed........................................ (59,034) (673,059) (7,337) (72,415) ---------- ----------- --------- ----------- Net increase........................................... 534,220 $ 6,196,477 463,944 $ 4,660,926 =========== =========== Shares outstanding: Beginning of period............................... 463,944 0 ---------- --------- End of period..................................... 998,164 463,944 ========== =========
NOTE 6 -- CONCENTRATION OF RISKS The International Fund invests in securities of foreign issuers in various countries. These investments may involve certain considerations and risks not typically associated with investments in the U.S., as a result of, among other factors, the possibility of future political and economical developments and the level of government supervision and regulation of securities markets in the various countries. NOTE 7 -- CAPITAL LOSS CARRYOVERS The following table shows the capital loss carryover available to offset possible future capital gains for the Fixed Income Fund: Amount Expiration Date ---------- --------------- $ 71,283 10/31/2006 1,540,705 10/31/2007 NOTE 8 -- TERMINATION OF THE 1838 SMALL CAP EQUITY FUND At a meeting held on March 20, 2000, the Board of Trustees of 1838 Investment Advisors Funds (the "Trust") unanimously approved the termination of the 1838 Small Cap Equity Fund (the "Small Cap Fund"), a separate series of the Trust, upon the redemption of all outstanding shares of the Small Cap Fund. As of the close of business on March 31, 2000, all shareholders of the Small Cap Fund had redeemed all of their Fund shares, and the Fund's assets were liquidated and distributed to the shareholders. 25 [THIS PAGE INTENTIONALLY LEFT BLANK] INVESTMENT ADVISER AND ADMINISTRATOR ------------------------------------------ 1838 INVESTMENT ADVISORS, INC. FIVE RADNOR CORPORATE CENTER SUITE 320 100 MATSONFORD ROAD RADNOR, PA 19087 DISTRIBUTOR ------------------------------------------ MBIA CAPITAL MANAGEMENT CORPORATION 113 KING STREET ARMONK, NY 10504 ACCOUNTING AND TRANSFER AGENT ------------------------------------------ MBIA MUNICIPAL INVESTORS SERVICE CORPORATION 113 KING STREET ARMONK, NY 10504 CUSTODIAN ------------------------------------------ FIRST UNION NATIONAL BANK 123 S. BROAD STREET PHILADELPHIA, PA 19101 LEGAL COUNSEL ------------------------------------------ PEPPER HAMILTON LLP 3000 TWO LOGAN SQUARE EIGHTEENTH & ARCH STREETS PHILADELPHIA, PA 19103 AUDITORS ------------------------------------------ PRICEWATERHOUSECOOPERS LLP 1177 AVENUE OF THE AMERICAS NEW YORK, NY 10036 1838 INVESTMENT ADVISORS FUNDS ------------------------------------------ INTERNATIONAL EQUITY FUND FIXED INCOME FUND LARGE CAP EQUITY FUND SEMI-ANNUAL REPORT APRIL 30, 2000 SR 04/00 -----END PRIVACY-ENHANCED MESSAGE-----