The international encyclopedia of mutual funds closed end funds and REITs

Mutual Funds 3ing growth in assets would look to the various stock funds ranging from aggressive growth to growth and income or may even consider interna­ tional stock funds.. Preferred

| J Routledge

Taylor & Francis Group LONDON AND NEW YORK

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ISBN 13: 978-1-579-58086-5 (hbk)

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A B O U T T H E A U T H O R S

Peter W M adlem has over 15 years of experience in investment research and management He has been a registered investment advisor and presi­ dent of his own publishing and investment advisory companies He is cur­ rently a portfolio manager with Santa Barbara Bank & Trust.

A published author, he has written five books and numerous articles

on investment topics His comments and insights have appeared in the pages of many leading financial newspapers and magazines including the

New York Times, Wall Street Journal, Investor’s Business Daily, Los Angeles Times, Money Magazine, and Kiplinger’s Personal Finance.

Mr Madlem is also a published and recorded classical composer whose works are heard in concert halls around the world and are avail­ able on Sony/Classical and Sonora Records.

Thomas K Sykes is a financial analyst with the investment management deparment of Santa Barbara Bank & Trust He is also a database devel­ oper for numerous companies in Santa Barbara, California.

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T A B L E OF C O N T E N T S

Section I MUTUAL FUNDS 1

WHAT IS A MUTUAL F U N D ? 1

HOW TO INVEST IN A MUTUAL F U N D 4

HOW A MUTUAL FUND O PE R A T ES 6

CATEGORIES OF MUTUAL F U N D S 7

Diversified Common Stock Companies .7

Aggressive Growth F u n d s 7

Emerging Market F u n d s 8

Europe Stock F u n d s 9

Foreign Stock F u n d s 9

Growth Stock F u n d s 10

Pacific Stock Funds 10

Small Company Funds 10

World Stock Funds .11

Balanced Com panies 11

Asset Allocation F u n d s 11

Balanced Funds 12

Growth and Income F u n d s 13

Income C o m panies 14

Equity-Income F u n d s 14

Multi-Asset Global F u n d s 15

Specialized C om panies 15

Bond and Preferred Stock C om panies 15

Convertible Bonds .16

Corporate Bonds— General 16

Corporate Bonds—High Q uality 17

Corporate Bonds—High Y ield 17

Government Bonds—Adjustable Rate M o r tg a g e 18

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Government Bonds— Treasury .19

Multi-Sector B o n d s 19

Municipal Bonds 19

Short-Term World Income Bonds .20

World B o n d s 20

MUTUAL FUND TABLE K E Y 20

MUTUAL FUND TABLE 24

Section II CLOSED-END FUNDS 235

WHAT IS A CLOSED-END FUND? 235

Diversifiied versus Non-Diversified Closed-End F u n d s 237

Fees and E x p e n se s 237

HOW TO PURCHASE A CLOSED-END F U N D 237

Items to Consider when Buying a Closed-End F u n d 237

REGULATION 238

DISCOUNTS .238

How to Calculate the Discount or Premium .240

RIGHTS OFFERINGS .241

CLOSED-END FUND CATEGORIES 242

Bond Funds 243

Corporate Bond Funds— G e n e ra l 244

Corporate Bond Funds—High Y ie ld 244

Income F u n d s 245

International Bond F u n d s 245

Multi-Sector Bond Funds 246

Municipal Bond Funds—N a tio n a l 246

Municipal Bond Funds—Single State 247

U.S Government Bond F u n d s 247

Equity Funds .247

Convertible Funds 248

Domestic Equity F u n d s 249

Single Country Equity Funds 249

World Equity Funds 250

CLOSED-END FUND TABLE KEY 250

CLOSED-END FUND T A B L E 254

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Section III REAL ESTATE INVESTMENT TRUSTS (REITs) 283

WHAT IS A REAL ESTATE INVESTMENT TRUST (REIT)? 283

H IST O R Y 287

THE MODERN R E IT 288

REIT M anagem ent 288

HOW TO INVEST IN A R E I T 288

Funds From O perations 289

Share P r i c e 289

REIT CATEGORIES 289

Property T y p e 290

Geographic F o c u s 290

THE U P R E IT 290

THE D ow nR E IT 291

REIT TABLE K E Y 291

REIT T A B L E 294

INDEX OF MUTUAL FUNDS, CLOSED-END FUNDS, AND REITs .307

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S e c t i o n I

M U T U A L F U N D S

The most extraordinary financial development in the last half o f the twen­ tieth century has been the growth and development of the Investment

Company Investment companies, or mutualfunds, currently number over

8,000 in the U.S alone That’s over three times more than all the stocks trading on the New York Stock Exchange (NYSE) The mutual fund industry is now the second largest financial institution in the nation, with assets approaching $4 trillion, up from $1 trillion in 1991 Over the past five years, the percentage of U.S households that invest in mutual funds has risen from 25 to 37 percent.

Investment companies have been in existence long before World War

II Their origins can be traced back to the early traders of biblical times Mutual funds enjoyed considerable popularity in England and Scotland beginning some 140 years ago Many o f these early British funds helped the westward expansion in the United States by supplying capital to pur­ chase land and build railroads In the U.S., early investment companies known as investment trusts played a prominent role in the booming 1920s.

Many innovations have brought the modem mutual fund to its current position as an important financial institution Millions o f people now con­ sider mutual funds in the same class as banks, savings and loans, and life insurance as tools for the accumulation o f wealth and financial planning Mutual funds are ideally suited for the smaller investor, but many wealthy and institutional investors find investment companies can effec­ tively address particular investment issues and provide effective returns.

W HAT IS A MUTUAL FUND?

A mutual fund is an investment company, a corporation, or trust whose sole business is to make investments on behalf of individuals and institu-

1

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tions sharing a common investment goal A fund endeavors to do a better job of investing participant funds and managing the investments than individual investors could do for themselves.

The funds that form the mutual fund investment pool come in vary­ ing amounts from many different investors The fund managers then use the pool o f money to buy a portfolio o f stocks, bonds, or money market securities intended to achieve the fund’s financial objectives.

While a mutual fund is simply one method of investing, many con­ sider them to be the best investment medium developed in the twentieth century There are an abundance of investment products, but none match the flexibility and versatility o f mutual funds Mutual funds offer profes­ sional management, liquidity, ease o f record keeping, diversification, and lower risk—all in one investment package.

The investment objectives of mutual funds cover a wide range There are mutual funds to invest in all types of investments, including:

• common stocks;

• preferred stocks;

• corporate bonds;

• tax-free municipal bonds;

• U.S Government obligations;

• zero-coupon bonds;

• convertible securities;

• gold and silver;

• foreign securities; and

• real estate.

A mutual fund’s investment objective, found in the prospectus, deter­ mines how fund assets are invested Some seek higher returns by follow­ ing, risky aggressive investment strategies; others pursue current income using more conservative investments Management will rely on funda­ mental, macro- or micro-economic conditions and even technical analy­ sis to arrive at a suitable portfolio composition.

One major attraction of mutual funds is that there are many funds offering the same investment strategy to select from For example, an individual needing high current income has a lot of bond funds to choose from An investor might even consider an equity fund and withdraw funds on a systematic basis either monthly or quarterly An investor desir­

Mutual Funds 3

ing growth in assets would look to the various stock funds ranging from aggressive growth to growth and income or may even consider interna­ tional stock funds An investor can also mix and match several mutual funds in order to achieve some current income plus inflation protection via bond and equity funds Some mutual funds, called balanced or asset allocation funds offer this ability internally

Performance figures for mutual funds are easily obtained There are many reputable sources—both in print and on-line.

Essentially, mutual funds are a single large investment account that is owned by many individual investors who share its income, expenses, profits, and losses, in proportion to their personal shares in the account Gains or losses in the fund are reflected in the share price and in share­ holder distributions o f realized gains Investors share in the benefits of the company’s investment advisory and management services by owning shares in the company In this way, mutual funds allow the small investor access to the same advantages and security that only the wealthy and large institutions could previously afford.

As a fund earns money, it is distributed to shareholders Earnings come from interest on bonds, dividends paid by stocks, and gains from the sale of securities in the fund’s portfolio Each investor receives paid- out dividends and capital gains in proportion to the number of fund shares owned In this way a shareholder with a few hundred dollars invested will get the same investment return per dollar as those who invest thousands The growing popularity of mutual funds is due in large part to their their democratic nature They allow all investors—from large to small—

to easily invest in a variety o f opportunites with convenience and effi­ ciency Ownership in large and expensive blue-chip companies (e.g., Microsoft and General Electric) is accessible to all investors.

Mutual funds have also opened up foreign stock and bond markets Emerging markets as well as more established foreign markets are now as easy to invest in as domestic securities.

Investors seeking fixed income are also well served by the modem mutual fund industry Now longer are such investors restricted to pass book savings accounts, Certificates o f Deposit (CDs) or savings bonds Bond or fixed-income mutual funds allow shareholders to invest in vary­ ing interest paying securities from U.S Treasuries bonds to collateralized mortgage obligations (CMOs), adjustable-rate preferred stock, floating- rate notes and even to other countries debts, denominated both in U.S dollars an in other currencies.

HOW TO INVEST IN A MUTUAL FUND

Investing in a mutual fund is like buying shares in the stock of any large corporation All an investor has to do is purchase the fund’s shares Instead o f owning an interest in one company, mutual fund investors are buying shares in a company owning the shares of other companies The price of the mutual fund’s shares is based on the value of all the securi­ ties that it owns.

Mutual funds continually issue new shares for purchase by investors The issuance o f new shares does not dilute the holdings o f current share­ holders since each new share created is exactly equal to the amount of money coming in to the fund to purchase it.

The value o f a fund’s share changes daily depending upon the value

o f the securities that it owns Fund share price is called net asset value or NAV It’s calculated daily by taking the total value of all the fund’s invest­ ments at the end of the day, deducting any expenses, and then dividing that number by the number o f shares outstanding.

Better newspapers report mutual fund net asset values every day An

example from the Investor's Business Daily is shown in Table 1.1.

Table 1.1: Net Asset Values, Tuesday, July 6,1999

-800-553-6319 12.28 -.03

A+ Capital Gr +15 +6 +211 37.56 -.15 C+ Equity Inc +9 +2 +86 15.01

High Yield Bd -1 -1 8.61

D+ Mid Cap Stk +10 +5 +122 15.37 +.03 D- Muni Bd -2 -2 +25 11.07 -.01 Small Cap Stk 0 +6 11.73 +.04 AAL Mutual B $154 mil

Balanced m +6 +3

800-553-6319 12.24 -.03 Capital Gr +14 +6 36.91 -.15 Equity Inc b +8 +2 15.00

High Yield Bd b -2 -1 8.61

Mid Cap Stk +9 +5 15.06 +.02 Small Cap Stk -1 +6 11.55 +.05

Source: Investor's Business Daily

Mutual Funds 5

The first row is in bold face type and is the fund family name This row is followed by assets under management and the telephone number

The next row begins with the IBD rating o f the fund’s performance over

the last 36 months relative to all other mutual funds—A is the best, E is the worst.

The next column in the row gives the fund name then the Year to Date (YTD) percentage change, its four-week percentage change, and the five- year after tax return The daily net asset value (NAV) follows and the last line is the point change for the day in the NAV.

IBD supplies a complete footnote table called “How to read mutual

fund tables & graphs” IBD has created one of the most investor-useful databases available in any publication The tables include fees charged for 12b-l, redemption charges, and front-end loads Funds that have per­ formed in the top two-percent are boldfaced.

Missing from IBD ’s table is the offer price However, these can be found in the Wall Street Journal and in the business section o f many

newspapers Any difference between the net asset value and offering price signifies that a fund charges a load For example, if the offering price is $20 and the net asset value (or bid) is $18.50, the sales charge is

$20 -$ 1 8 5 0 = $1.50.

Sales charges are usually expressed as a percentage of the offering price In our example:

$1.50/$20.00 = 7.50% of the offering price.

A fund’s prospectus must reveal all sales charges that are imposed Sales charges are discounted depending on how much is invested The dollar amount necessary to qualify for a discount is called a breakpoint Breakpoint schedules show exact dollar values and varies from fund to fund The first discount is generally offered with a $10,000 investment Table 1.2 shows a sample schedule of sales charges.

Table 1.2: Schedule of Front-End Fee Charges: An Example

Amount Invested Fees

According to our sample schedule, a fund purchase o f up to $24,999 and investor pays a sales charge equal to 5.50 percent o f the current offer­ ing price If the purchase is $25,000 up to $49,999, the sales charge is reduced to 5.25 percent of the current offering price The greater the num­ ber o f dollars invested the smaller the percentage sales charge.

HOW A M UTUAL FUND OPERATES

Mutual funds are owned by shareholders However, day-to-day operation

of the fund is handled by a management company Recall the IBD mutu­

al fund table It began with the fund family This is the management com­ pany that created the fund and will typically offer many other funds, financial products, and financial services A management company cus­ tomarily supplies fund investment advisory services.

The investment advisor supervises a fund’s securities portfolio The advisor is paid for its services by charging a fee based on the total value

o f the fund’s assets These fees vary, but usually fall around one-half of one percent The advisor hires a portfolio manager to handle each fund’s investments He or she may purchase stocks, bonds, or both depending on the type of fund managed.

The money managers decide what to buy, when to buy it, and what price to pay They also determine when to sell or take profits Money managers use a variety of tools to come to their decisions They usually have a staff o f analysts who research companies in specific industries that the fund owns, or might be interested in owning.

Analysts look at a company’s accounting reports, including the bal­ ance sheet, income statements, and statement of cash flows They also consider general economic and market trends and utilize the additional resources supplied by economic and statistical data sources On the basis

o f their study, the money manager chooses what and when to buy, sell, or hold for the fund’s portfolio, depending on the investment objective of the fund.

In addition to the investment advisor, the management company can also contract with an underwriter who establishes the distribution net­ work that allow the fund’s shares to reach the investing public The underwriter may sell fund shares to securities dealers as a wholesaler, or

it may sell retail directly to the public.

This Encyclopedia classifies mutual funds in six broad investment

categories:

6 Preferred Stock Companies

CATEGORIES OF MUTUAL FUNDS

Diversified Common Stock Companies

Diversified common stock companies have eight component fund types:

1 Aggressive Growth Funds

2 Emerging Market Funds

3 Europe Stock Funds

4 Foreign Stock Funds

5 Growth Stock Funds

6 Pacific Stock Funds

7 Small Company Funds

8 World Stock Funds

Diversified common stock companies comprise a large percentage o f mutual funds These companies invest their assets in a portfolio of com­ mon stocks in a wide variety of industries Their primary objective is appreciation of capital while income is of secondary importance Objectives range from conservative to highly aggressive strategies Diversified common stock fund performance is more volatile than any other fund types.

Aggressive Growth Funds

Aggressive growth funds seek maximum capital gains Dividends or income are not a relevant factor Many of these funds can use leverage to increase positions as well as utilize stock options and futures contracts Typically, these strategies comprise a very small portion of portfolio holdings.

Aggressive funds deliver superior results during strong markets and second-rate results during bad markets This is characterized by their high Betas o f 1.2 This means they are 20 percent more volatile than the S&P

500 which, as the benchmark, always has a beta of 1.0 The typical price- eamings (P/E) ratio for stocks in aggressive fund portfolios is 37, approx­ imately 14 percent higher than S&P 500 stocks that have an average P/E ratio o f 33.

Aggressive growth funds have an average standard deviation of 28 which means returns can fluctuate up or down 28 percent around the mean in any year One good characteristic of the stock market is that the longer a security is held the lower the volatility of returns Therefore, aggressive funds should be owned either as part of a broader, diversified portfolio, or by aggressive investors who can live with high share price fluctuations.

For example, since returns for aggressive growth funds have aver­ aged 14.95 percent over the past three years, annual returns can be expected to range from +42.95 on the upside (14.95 + 28.00) to -13.05 (14.95 - 28.00) on the downside This margin represents one standard deviation Once standard deviation shows the range of returns you can expect 67 percent of the time or roughly two out o f every three years.

At the time of this writing, the top ten holdings of aggressive growth funds included:

Emerging Market Funds

This category invests in stock issued by companies in emerging markets

on a worldwide basis They are typically not concentrated in any one

Mutual Funds 9

country or sector Instead they tend to favor broad diversification The category’s standard deviation is high at 26, while beta score is 1.26, con­ siderably higher, as would be expected, than the S&P 500 index These funds are primarily suitable for diversification efforts in a larger portfolio construct.

Europe Stock Funds

These funds invest a majority o f their assets in the equity securities of companies based in Europe The companies are generally large-cap, established representatives of a broad range o f industries Risk levels, as measured by the average fund beta is a very tame 0.60, or 40 percent below that of our own domestic market Standard deviation, at 18, is eleven percent below domestic levels as well These funds are particular­

ly appealing as the European Union motors ahead with the launch of the unified currency, the Euro The region still needs to address economic issues of centralized government and high costs associated with a top- heavy welfare state, but economic realities will force progress in these areas.

Europe stock funds have the following historical annualized returns for the trailing three-, five-, and ten-year periods:

3-years 5-years 10-years

Foreign Stock Funds

Foreign stock funds invest in equity securities o f companies located out­ side o f the United States Currently, they number at approximately 270 funds The rapid rate of global economic and social change has focused a great deal of interest on this group This fund category allows domestic investors to invest around the world in a managed and diversified basis

An important issue with investing outside the U.S is the level of correla­ tion a foreign market has with the domestic market The lower the corre­ lation, the better since diversification is based on the relationship between different security performance characteristics When one group o f assets goes down, a low correlation asset should go up The average beta for this group is 0.76, or about three-fourths the volatility of the S&P 500 index The average P/E ratio for this category, at 26, is also significantly lower than the domestic average.

Foreign stock funds have the following historical annualized returns for the trailing three-, five-, ten-, and fifteen-year periods:

3-years 5-years 10-years 15-years

Growth Stock Funds

Growth funds seek high capital appreciation with less risk than aggres­ sive growth funds They are suitable for investors willing to accept mod­ erate levels of market risk in pursuit of higher than average capital gains Stocks are normally selected on the basis of an above average growth potential over the longer term They perform best in rising markets The average beta, or relative volatility o f these funds ranges from 1.0 to 1.5 times that of the broader market.

Growth stock funds show the following historical annualized returns for trailing three-, five-, ten-, and fifteen-year periods:

3-years 5-years 10-years 15-years

Pacific Stock Funds

Pacific stock funds invest in the equity securities of companies located in countries throughout the Pacific Rim, including Japan, China, Hong Kong, Malaysia, Singapore, New Zealand, and Australia This is a wide geographic region and, because many of these countries are emerging economies, the funds tend to be very risky At the time of this writing these funds appear to be very cheap on a relative basis to the rest of the world’s markets Nimble investors who are bottom fishing can find a vari­ ety o f candidates here.

Pacific stock funds have the following historical annualized returns for the trailing three-, five-, ten-, and fifteen-year periods:

3-years 5-years 10-years 15-years

Small Company Funds

Small company stock funds are diversified common stock funds They are for the more aggressive investor as they specialize in the relatively illiquid arena of small-capitalization companies This type of company is

in the earlier stages of their life cycle.

Small-company stocks have an average P/E ratio of 27 The price earnings ratio refers to the selling price of a stock in relation to its annu­

al earrings Thus a fund category that has a p/e ratio of ten is comprised

Mutual Funds 11

o f mutual funds whose typical stock in the portfolio is selling for ten times what the corporation’s earnings are for the year Small company stock funds have a standard deviation of 25 percent and a beta o f 1.01 per­ cent, figures that support the view that this category is slightly less volatile than aggressive growth funds.

Small company stock funds have the following historical annualized returns for the trailing three-, five-, ten-, and fifteen-year periods:

3-years 5-years 10-years 15-years

World Stock Funds

These funds seek capital appreciation by investing throughout the world That means they can invest in the equity securities of issuers located throughout the world, including up to 50 percent in the United States World stock funds, at 18, have one o f the lowest standard deviation scores

o f any o f the pure equity funds The beta is 0.81, also below the domes­ tic equity index.

World Stock Funds have the following historical annualized returns for the trailing three-, five-, ten-, and fifteen-year periods:

3-years 5-years 10-years 15-year

3 Growth and Income Funds

Asset Allocation Funds

Asset allocation funds have two dual goals, income and capital apprecia­ tion Managers will use flexible approaches when combining stocks, bonds, and cash Assets will be shifted based on analysis of trends in the business cycle Like its balanced brethren, asset allocation funds provide

an income stream although the average yield is below three percent.

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Standard deviation and beta are both low at 11 percent and 0.59 respectively Performance for asset allocation funds over the past three-, five-, ten-, and fifteen-year periods is:

Balanced Funds

This category invests in equities and corporate bonds Weightings between the two are determined by the fund manager’s perception of cur­ rent and expected market conditions If equity markets look strong, the portfolio will be weighted higher in equities The maximum equity allo­ cation is usually 75 percent of total assets since some fixed income expo­ sure is necessary for the fund’s objective Similarly, no matter how bear­ ish the equity outlook may be, a balanced fund will seldom, if ever, allo­ cate more than 70 percent of its holdings to bonds The fund’s prospectus will describe allowable weighting ranges These boundaries must be fol­ lowed at all time Fund liquidity is supplied by cash equivalents (T-bills, CDs, and commercial paper) or, possibly, small positions in preferred stocks and convertible securities.

The standard deviation for balanced funds, at 12 percent, is less than half the level o f small company funds and aggressive growth funds This means the expected return for any given year will vary by 12 percent For example, if you were expecting an annualized return of 14 percent, your actual return would range from 2 percent to 26 percent roughly two-thirds

Mutual Funds 13

Growth and Income Funds

Growth and income funds seek capital growth and current income as roughly equal objectives Investments are selected for their potential price appreciation and their high dividend-paying capabilities These ftinds aren’t trying to hit home runs, rather they seek a balanced investment approach with the objective to create, over time, a rising level of income through increased corporate earnings and dividends as well as growth in value through capital appreciation Investors in these funds are willing to accept some fluctuation in income and market value o f the investments but the bonds do provide a good level of stability.

Risk scores are low with beta at 0.91 and standard deviation at 18 This means these ftinds will tend to slightly under-perform the market during bull markets and outperform during bear markets The investor can expect to have returns that move in a range o f plus or minus 18 per­ cent from the average 67 percent of the time

Growth and income funds have the following historical annualized returns for the trailing three-, five-, ten-, and fifteen-years:

3-years 5-years 10-years 15-years

Technology Retail Health Financials Services Health Health Technology

Notice that these companies are blue-chip names recognized by any investor Vomado Realty Trust is a real estate investment trust (REIT) that owns real estate and generates high yields through the collection o f rent.

as value companies, companies with lower price-to-book and P/E ratios Standard deviation is also a low 16 compared to 20 for the S&P Beta is only three-quarters o f the market average at 0.76.

The top-ten holdings of equity-income funds are:

Financial, heath, and service companies comprise the bulk o f these portfolios They are best suited for conservative investors who seek increased dividend income through a growing portfolio of equity securi­ ties.

Equity-income funds have the following historical annualized returns for the trailing three-, five-, ten-, and fifteen-year periods:

Mutual Funds 15

3-years 5-years 10-years 15-years

Multi-Asset Global Funds

Multi-asset global funds are total return funds that invest in varying com­ binations o f equities—fixed-income and other asset classes These funds may invest a significant portion o f assets in foreign securities.

The current portfolio for these funds is heavily weighted in foreign government security bonds.

Multi-asset global funds have low standard deviation and beta scores

of 12 and 0.58 respectively Since they are total return funds they seek to find returns wherever available depending on the manager’s perception of economic and market conditions The category has the following histori­ cal annualized returns for the trailing three-, five-, ten-, and fifteen-years:

3-years 5-years 10-years 15-years

Eight-percent returns may not seem like much in today’s unusual environment, but consider this; $100,000 invested today and earning 8 percent per year would grow to $466,000 in 20 years.

Specialized Companies

Funds of specialized companies seek capital appreciation by investing primarily in stocks or companies within specific market sectors or indus­ tries These funds are very targeted and can rise and fall with the business cycle For example, some funds specialized in equity securities issued by health care companies such as drug manufacturers, hospitals, and biotechnology firms Other specialty funds invest in financial companies such as banks, savings and loans, insurance, and brokerage firms.

Being concentrated, these funds can add quite a bit of zip to a well- diversified portfolio However, they are not buy-and-hold funds An investor in specialty funds must have a clear strategy for buying and sell­ ing these potentially volatile issues.

Bond and Preferred Stock Companies

The last two classifications of mutual funds are the bond and preferred stock companies Funds in this group include:

1 Convertible Bonds

2 Corporate Bonds—High Quality

3 Corporate Bonds—High Yield

4 Government Bonds—Adjustable Rate Mortgage (ARM)

to up to thirty years “Weighted maturity” refers to the time left until the average bond in the portfolio comes due or matures.

The standard deviation for bonds is less than 8 percent, or about half the level o f balanced mutual funds This means the expected return for any given month, quarter, or year will be more predictable than practical­

ly any other category of mutual funds.

Using a beta measurement for bonds is of little value, since beta defines stock market risk and has nothing to do with interest rate or finan­ cial risk.

Convertible Bonds

Convertible bond funds are designed to offer some of the capital appreci­ ation potential o f stock funds while also supplying some of die safety and yield of bond funds, To do this they focus on convertible bonds and con­ vertible preferred stocks Convertible bonds allow investors to convert the bonds into shares of stock, usually at a preset price These securities thus act a bit like stocks and a bit like bonds.

Corporate Bonds— General

Corporate bond funds are designed to supply current income They are made up primarily of bonds issued by domestic corporations although government securities often comprise a modest part of these funds Most portfolios consist exclusively U.S issues.

Mutual Funds

There are three general types of corporate bond funds: Short-term, Medium-term, and Long-term Short-term bond funds consist of debt securities with maturities o f five years or less They have very little inter­ est rate risk or reward Medium-term bond funds have maturities that average between six and ten years These funds are about a third or half

as risky as long-term bond funds Long-term corporate bond funds are subject to the greatest interest rate risk They typically move about seven

or eight percent in price, up or down, for every one percent change in interest rates.

Corporate Bonds— High Quality

This category o f bond fund invests for high current income by placing at least 65 percent of their assets in corporate debt securities that are rated

A or higher They generally maintain average ratings of AA or better The average coupon rate for these funds is now at 6.84 percent but these are premium-priced bonds so the average yield for all high-quality corporate bond funds is over a percentage point lower at 5 5 percent Interestingly enough, for the present, the top-ten holdings of high-quality corporate bond funds are U.S Treasury and agency bonds.

Bond funds have a wide range of maturities The fund’s name will usually indicate whether it is made up of short-term or medium-term (intermediate) obligations If the name o f the fund does not include the words “short-term” or “intermediate,” then the fund is most likely invest­

ed in bonds with average maturities of over ten years The greater the maturity, the more the fund’s share value can change There is an inverse relationship between interest rates and the value o f a bond; when one moves up the other goes down The weighted average maturity for this category is 8 years.

Corporate Bonds— High Yield

High-yield corporate bond funds concentrate on lower-quality bonds These bonds are riskier than bonds of higher quality companies and thus have to offer higher coupons to attract investors While these funds offer higher yields than other types of funds, they are more vulnerable to eco­ nomic and credit risk The largest risk to junk bond investors has been the risk of default, losses from recessions, and bankruptcies.

Fortunately defaults have been rare lately and yield-seeking investors have enjoyed a spectacular run for most o f the 1990s Low inflation and steady corporate growth has been a nearly perfect environment for high- yield issuers Default rates fell to historically low levels in the decade

often below 2 percent per year Investors have also poured money into the junk bond market and driven prices higher in an attempt to earn more income Increased merger activity has also pushed junk prices up as newly combined firms retire debt to clean up balance sheets.

Government Bonds— Adjustable Rate Mortgage

(ARM)

Adjustable Rate Mortgage (ARM) ftinds seek current income consistent with low volatility o f principal The ftinds normally invest at least 65 per­ cent of assets in U.S government adjustable-rate mortgage pass-through securities and other mortgage-related securities They seek to minimize portfolio volatility by maintaining durations equal to that o f a six-month

to one-year U.S Treasury security, and by using some hedging techniques.

Duration is a measure o f a bond’s interest-rate sensitivity The longer

a fund’s duration, the more sensitive it is to interest rate shifts A bond with a twelve-year duration is twice as sensitive as a bond with a six-year duration A bond with a duration o f six will see its value rise by approx­ imately six percent should interest rates drop one percent, and converse­

ly, its value will drop by roughly six percent should interest rates rise one percent.

Adjustable-rate ftinds have very low volatility with a standard devia­ tion o f 0.15 The current average yield is 5.3 percent.

The largest risk faced by ARM funds is the risk o f pre-payments as interest rates fall As interest rates fall, mortgage holders refinance their loans to capture the lower rates This leads to return of principal that must also be reinvested at the newer lower rates However, ftinds that hold older ARMs that were pooled at least six or more years ago see this risk diminish as seasoned mortgages tend to not be refinanced.

Government Bonds— General

Government bond funds are an excellent choice for conservative investors requiring safety and high income High tax-bracket investors should look elsewhere however, unless they are able to shelter the income

in a retirement account or annuity.

These funds invest in the direct and indirect obligations that are issued by the U.S Government Government bond funds consist of any

o f the following: Treasury-bills, Treasury-notes, Treasury-bonds, GNMAs, and FNMAs The U.S Gvemment finances operations through

Mutual Funds 19

the issuance of Treasury bills, notes and bonds These securities are exempt from state income taxes.

Government Bonds— Mortgage

These conservative income funds concentrate at least 65 percent of their assets in securities backed by mortgages These securities include instru­ ments issued by the Government National Mortgage Association (GNMA), the Federal National Mortgage Association (FNMA), and the Federal Home Loan Mortgage Corporation (FHLMC).

GNMAs are indirect obligations o f the government but are backed by the full faith and credit o f the United States FNMAs and FHLMCs are not issued by the government but are considered nearly identical in safe­

ty to GNMAs Both are subject to state and local income taxes All secu­ rities in a mortgage bond fund are subject to federal income taxes.

Government Bond— Treasury

These conservative income funds concentrate on bonds investing at least

80 percent o f their assets in U.S Treasury securities These are the most liquid and highest-quality debt securities in the world These are issues backed by the full faith and credit of the U.S Government.

Multi-Sector Bonds

These funds are generally more diversified than other types of bond funds They typically divide their assets among U.S government bonds, foreign government bonds, foreign corporate bonds, and domestic corpo­ rate bonds including high yield issues Some of these funds go even fiir- ther and invest in municipal bonds and exotic mortgage-backed securi­ ties By spreading assets across many different markets these funds seek higher yields without taking on undue risk.

Municipal Bonds

These funds invest in portfolios o f municipal bonds issued by a state or local municipal entity Funds raised by these bonds usually support a gen­ eral financial need o f the issuer or are spent on special projects such as housing or water treatment plans The bondholder does not have to pay federal taxes on the interest and usually does not have to pay state or local taxes if the bond was issued in the state of his or her residence (i.e., a California resident would not have to pay taxes on a municipal bond issued in the state).

Short-Term World Income Bonds

This category seeks high current income by investing in a portfolio o f various non-U.S currency-denominated bonds, usually with maturities o f three years or less Funds in this category seek higher yields than a money-market fund and less fluctuation of net asset value than a world bond fund The rapidly moving currency exchange rates necessitate that these funds engage in substantial hedging strategies.

World Bonds

World bond funds seek current income with capital appreciation as a sec­ ondary objective by investing primarily in debt obligations issued throughout the world These bonds are frequently foreign government issues and offer high yields with low volatility Fund management, in order to alleviate currency exchange fluctuations, use extensive hedging techniques.

M UTUAL FUND TABLE KEY

The fund category is identified at the top of each page Fund category describes the actual strategy employed to achieve the fund’s objective For example, a diversified common stock fund with an objective o f small company can specialize in small-capitalization companies This would be the fund’s “objective.”

All funds are listed in alphabetical order under their categories, as follows:

Diversified Common Stock Companies

Aggressive Growth Funds

Emerging Market Funds

Europe Stock Funds

Foreign Stock Funds

Growth Stock Funds

Pacific Stock Funds

Small Company Funds

World Stock Funds

Corporate Bonds—High Quality

Corporate Bonds—High Yield

Government Bonds—Adjustable Rate Mortgage

A = front-end load

B = back-end load

C = low back-end load but higher 12b-l fees.

Institutional shares are shares available to trust departments and other large institutional buyers that do not carry any load fees.

Symbol: A fund symbol identifies the mutual fund on an exchange If no

symbol appears on the table either one has not been assigned to the fund because it is too new and not large enough to trade, or it is a sub-class of

a similar fund.

Year Offered: The year the fund was brought public.

Manager Tenure How long the current manager has been at the helm It

is preferable to invest in funds with longer management tenure The longer the term the more consistent a fund’s return expectation should be.

Objective: The objective is the funds stated investment goal and is found

in the fund’s prospectus In this Encyclopedia, funds are grouped by their

objective.

Net Assets ($MM): The fund’s net assets (stated in millions of dollars)

are the net worth of the fund that is the difference between a the compa­ ny’s total assets and liabilities.

Minimum Purchase: This column presents the minimum amount a fund

will need to establish a new account.

Maximum Sales Charge: This column shows the fund’s sales charge

expressed as a percentage of the initial investment There are two types

of sales charges: front-end loads charged on the purchase, and back-end

or deferred loads chaiged when fund shares are sold The latter type o f charge typically declines over a five- to seven-year period There are many funds that charge no load at all for investment Studies have shown that funds with sales loads do not achieve investment results that are superior to funds that do not charge a sales fee.

Expense Ratio: The annual expense ratio is a measure of all asset-based

fees and expenses for the fiscal year It includes such charges as 12b-l fees, management fees, administrative fees, and fund operating costs Brokerage costs and any sales loads whether initial or deferred are not included in the expense ratio figure.

Total Return: Total return measures the annual return for the fund that

includes price appreciation and dividends or interest The five-year aver­ age is an annualized figure for five full years The year-to-date figure is through November 1998.

Mutual Funds 23

Yield: The current yield determined by dividing the stated annual income

distributions o f the fund by the net asset value.

Beta: Beta is a measure of a fund’s relative volatility Beta is the covari­

ance o f a fond in relation to the rest o f the stock market The Standard & Poor’s 500 Stock Index has a beta coefficient of 1.0 Any stock with a higher beta is more volatile than the market Lower beta fonds are expect­

ed to rise and fall more slowly than the market Conservative investors concerned with preservation of capital should focus on low beta fonds while investors seeking high growth should look at high beta funds.

Alpha Index: Is an alphabetical identifier for the fonds The first and last

entries are shown next to the section headings on odd numbered pages.

$10,000 Invested on 12/31/1988: The total return on a hypothetical

$10,000 investment in fond shares with all distributions reinvested.

Phone Number: The fund’s phone number for investors seeking a

prospectus or more information.

Net Max.

DIVERSIFIED COMMON STOCK COMPANIES: AGGRESSIVE GROWTH (AG)

Year Mgr Assets Min Sales Exp.Fund Name Sym Offrd Ten Obj ($MM) Pur Charge RatioAIM Constellation A CSTGX 1976 4 yrs AG 11920.0 $500 5.5% 1.11Alger Capital Apprec Retire ALARX 1993 4 yrs AG 4.6 $0 - 1.42Alger Capital Appre B ACAPX 1993 4 yrs AG 199.3 $0 . 2.38Alliance Quasar A QUASX 1969 4 yrs AG 496.2 $250 4.3% 1.67American Cent-20thC Vista Is TWVIX 1996 2 yrs AG 0.1 $5,000,000 - 0.8American Cent-20thC Vistalnv TWCVX 1983 1 yr AG 871.6 $2,500 1American Heritage AHERX 1952 8 yrs AG 8.3 $2,500 - 5.85American Heritage Gr AHEGX 1994 4 yrs AG 0.6 $1,000 - 2.67Bridgeway Ag Gr BRAGX 1994 4 yrs AG 5.1 $2,000 2Bull & Bear Special Eq BBSEX 1986 N/A AG 33.9 $1,000 2.53Citizens Emerging Gr WAEGX 1994 4 yrs AG 76.7 $2,500 1.99Commerce MidCap Inst CFAGX 1994 2 yrs AG 130.7 $1,000 - 1.23Countrywide Aggressive Gr CAGFX 1995 2 yrs AG 11.2 $1,000 4.0% 1.95Crabbe Huson Special Prim CHSPX 1987 4 yrs AG 105.0 $2,000 - 1.5Delaware Pooled Ag Gr DPAGX 1992 2 yrs AG 5.3 $1,000,000 - 0.9Delaware Trend A DELTX 1968 2 yrs AG 345.9 $1,000 4.8% 1.34Diversified Inv Aggr Equity DVAEX 1996 2 yrs AG 46.5 $5,000 - 1.41Dreyfus Aggressive Growth DGVAX 1995 N/A AG 31.5 $2,500 1.34Dreyfus Premier Ag Gr A DRLEX 1969 N/A AG 120.8 $1,000 5.8% 1.2Enterprise Capital Apprec A ENCAX 1987 11 yrs AG 96.9 $1,000 4.8% 1.6Evergreen Ag Gr A EAGAX 1983 15 yrs AG 116.7 $1,000 4.8% 1.25Evergreen Omega A EKOAX 1968 9 yrs AG 145.8 $1,000 4.8% 1.31Evergreen Small Co Gr B EKABX 1936 2 yrs AG 204.7 $1,000 - 1.77Federated Ag Gr A AGFAX 1996 2 yrs AG 6.5 $500 5.5% 1.74Fidelity Capital Apprec FDCAX 1986 2 yrs AG 2171.4 $2,500 0.66Fidelity Emerging Growth FDEGX 1990 1 yr AG 2200.4 $2,500 . 1.05First American Strat Aggress FAAGX 1996 2 yrs AG 62.6 $1,000 0.6Founders Special FRSPX 1961 N/A AG 212.4 $1,000 . 1.3FundMngr Ag Gr Fin Adv FTAGX 1984 8 yrs AG 22.2 $1,000 4.5% 1.59Goldman Sachs Agg Gr Str A GAPAX 1998 N/A AG 38.3 $1,000 5.5% 0Idex Aggressive Growth A IAGAX 1994 3 yrs AG 43.5 $500 5.5% 1.85IDS Strategy Aggressive B INAGX 1984 N/A AG 803.1 $2,000 1.77Invesco Dynamics FIDYX 1967 3 yrs AG 1167.5 $1,000 1.08IPO Plus Aftermarket IPOSX 1997 1 yr AG 9.8 $2,500 0Janus Olympus JAOLX 1995 1 yr AG 603.5 $2,500 1.03Kaufmann KAUFX 1986 12 yrs AG 4055.6 $1,500 1.88Kemper Aggressive Growth A KGGAX 1996 N/A AG 21.0 $1,000 5.8% 1.49Markman Aggressive Alloc MMAGX 1995 3 yrs AG 67.9 $25,000 0.95Mason Street Agg Gr Stk A MAGAX 1997 1 yr AG 32.3 $1,000 4.8% 1.3Matterhorn Growth FWLEX 1980 1 yr AG 7.5 $1,000 - 4MFS Emerging Growth B MEGBX 1986 12 yrs AG 6121.4 $1,000 1.97Navellier Aggr Growth NPFGX 1995 3 yrs AG 83.1 $2,000 2NewCap Contrarian - 1996 2 yrs AG 0.5 $2,500 - 2.83Oppenheimer Capital Ap A OPTFX 1981 3 yrs AG 1305.1 $1,000 5.8% 1.01O'Shaughnessy Aggress Growth OSAGX 1996 2 yrs AG 8.5 $2,500 - 1.98Pacific Horizon Aggr Grth A PHAGX 1984 N/A AG 161.9 $500 5.5% 1.46Permanent Port Aggr Growth PAGRX 1990 8 yrs AG 16.2 $1,000 - 1.46Phoenix Aggressive Growth A PHSKX 1981 N/A AG 259.7 $500 4.8% 1.2PIMCo Opportunity C POPCX 1984 N/A AG 437.3 $1,000 2.06Pin Oak Aggressive Stock POGSX 1992 6 yrs AG 35.2 $2,000 - 0.99Principal MidCap A PEMGX 1987 11 yrs AG 298.6 $1,000 4.8% 1.26Prudential Emerging Growth A PEEAX 1996 2 yrs AG 36.1 $1,000 5.0% 1.46Putnam Voyager A PVOYX 1969 3 yrs AG 13855.1 $500 5.8% 1.02Putnam Voyager II A PVIIX 1993 4 yrs AG 662.9 $500 5.8% 1.22

Mutual Funds— AIM-QUA 25

Total Return (%) $10,000

5-yr Alpha Invested Phone

1994 1995 1996 1997 YTD Avg Yield Beta Index 12/31/98 Number

1.30% 35.46% 16.27% 12.92% -4.74% 12.03% - 1.17 AIM 52,237.27 800-347-4246-8.34% 54.51% 10.39% 25.44% 22.86% 1.27 ALG 24,094.21 800-992-3362-2.22% 78.57% 13.79% 20.20% 6.80% - 1.24 ALG 25,505.76 800-992-3863-7.27% 47.64% 32.62% 17.24% -18.66% 11.81% 1.11 ALL 27,250.48 800-227-4618

* * * -8.54% -23.86% 0 AME 6,963.76 800-345-20214.68% 46.14% 7.56% -8.68% -24.07% 1.70% 1.18 AME 26,231.40 800-345-2021-35.33% -30.59% -5.09% 75.00% -48.98% -16.97% - 1.06 AME 8,485.69 800-828-505024.21% 2.79% -2.93% -28.57% - 5.60% 1.34 AME 8,852.65 800-828-505027.05% 32.20% 18.27% -13.92% 1.18 BRI 17,099.48 800-661-3550-16.54% 40.47% 1.06% 5.23% -15.91% -0.03% 1.39 BUL 19,919.97 800-847-420040.73% 13.91% 17.69% 4.97% 1.16 CIT 19,804.02 800-223-701038.71% 12.49% 20.56% -3.82% - - 1.1 COM 18,092.96 800-305-2140

- 24.08% 17.05% -6.93% - - 1.13 COU 13,517.08 800-543-872111.72% 10.79% 5.92% 11.28% -42.78% -1.06% 1.62% 0.89 CRA 21,344.28 800-541-9732-4.01% 29.69% 13.34% 13.00% -4.02% 9.59% 1.07 DEL 17,255.60 800-523-4640-9.97% 42.51% 10.71% 19.43% -7.62% 9.52% . 1.11 DEL 46,221.53 800-523-4640

. 20.64% -15.84% -47.17% - 1.08 DRE 5,363.86 800-373-9387-6.97% 11.00% -2.37% -13.03% -42.95% -12.06% - 1.21 DRE 9,598.17 800-554-4611-3.46% 25.70% 16.52% 20.27% 3.83% 11.80% - 1.22 ENT 43,802.93 800-432-4320-9.31% 34.34% 17.23% 7.66% 0.52% 10.11% 1.27 EVE 47,020.26 800-343-2898-5.66% 36.94% 11.31% 24.53% 1.85% 12.33% 1.05 EVE 45,416.29 800-343-28980.18% 36.27% 0.82% 13.39% -29.05% 1.75% 1.2 EVE 30,627.72 800-343-2898

. 30.06% -21.70% - 0 FED 10,183.70 800-341-74002.52% 18.77% 15.12% 26.52% -6.30% 12.87% 0.38% 1.11 FID 30,361.45 800-544-8888-0.18% 35.94% 15.80% 19.45% 13.65% 16.94% _ 1.24 FID 46,304.28 800-544-8888

. 18.61% -6.93% - 1.79% 0 FIR 11,039.03 800-637-2548-4.90% 25.69% 15.33% 16.43% -20.34% 5.93% 1.19 FOU 32,789.24 800-525-2440-1.15% 24.75% 16.58% 16.65% -10.10% 9.21% 2.39% 0.97 FUN 28,263.57 800-344-9033

. 54.95% 5.99% 23.28% 15.42% . 1.18 IDE 23,368.46 888-233-4339-6.88% 35.05% 18.19% 14.72% -3.20% 11.34% - 1.21 IDS 35,127.97 800-328-8300-1.95% 37.55% 15.65% 24.90% -2.65% 14.20% - 1.14 INV 48,964.51 800-525-8085

- 21.73% 26.73% 18.33% 0.25% 0 JAN 18,254.58 800-525-89838.99% 36.89% 20.92% 12.56% -13.97% 12.76% 1.05 KAU 56,840.42 800-237-0132

- 33.38% -9.18% - - 0 KEM 12,113.57 800-621-104811.72% 18.96% -3.92% - 1.43% 1.02 MAR 12,769.23 800-707-2771

-11.70% 25.28% 10.51% 13.66% -5.93% 6.91% * 0.81 MAT 27,690.09 800-637-39014.00% 40.07% 13.85% 19.73% -3.49% 15.48% . 1.29 MFS 61,608.75 800-637-2929

. 22.62% 9.77% -12.87% 0 NAV 11,727.70 800-887-8671

. -13.05% -50.79% - 0 NEW 4,278.81 516-951-05000.46% 34.85% 27.96% 26.32% -2.10% 17.01% 0.39% 1.07 OPP 40,169.31 800-525-7048

* 22.31% -14.37% 0 O'S 10,473.41 800-797-0773-11.47% 43.32% 14.07% 14.22% -13.94% 6.57% 1.22 PAC 36,846.75 800-332-38631.04% 32.60% 14.53% 32.68% -10.65% 13.34% 0.35% 1.24 PER 34,696.95 800-531-5142-3.92% 51.71% 11.09% 19.37% -7.59% 13.06% 1.24 PHO 31,908.98 800-243-4361-4.73% 41.53% 11.54% -4.75% -18.68% 2.77% . 1.15 PIM 41,463.51 800-426-0107

- 37.22% 10.78% 1.30% 3.52% 10.23% - 1.52 PIN 16,221.45 888-462-53863.03% 34.20% 19.13% 22.94% -14.74% 12.52% 1.03 PRI 38,396.61 800-451-5447

. 22.34% -7.66% - - 0 PRU 11,296.88 800-225-18520.44% 40.16% 12.80% 25.98% -2.10% 15.52% 1.13 PUT 50,249.10 800-225-15810.47% 49.99% 7.71% 23.42% -3.82% 15.64% - 1.19 PUT 19,267.49 800-225-1581

DIVERSIFIED COMMON STOCK COMPANIES: AGGRESSIVE GROWTH (AG), con't

Year Mgr Assets Min Sales Exp

Rydex Nova RYNVX 1993 4 yrs AG 347.1 $25,000 1.11Security Ultra A SECUX 1969 N/A AG 67.6 $100 5.8% 1.71

Smith Barney Aggr Growth A SHRAX 1983 15 yrs AG 341.9 $1,000 5.0% 1.21Stagecoach Strat Growth A OSGFX 1993 3 yrs AG 94.4 $1,000 4.5% 1.18State St Research Capital S SCFCX 1984 N/A AG 113.0 $2,500 0.96Stein Roe Capital Opport SRFCX 1969 5 yrs AG 640.4 $2,500 1.17Strong Discovery STDIX 1987 7 yrs AG 348.8 $2,500 - 1.4Style Select Aggr Growth A SSAAX 1996 2 yrs AG 60.0 $500 5.8% 0Transamerica Prem Agg Gr Inv TPAGX 1997 1 yr AG 55.1 $1,000 * 1.4Undiscovered Mgrs Spec SmCap . 1997 1 yr AG 12.4 $250,000 . 0USAA Aggressive Growth USAUX 1981 3 yrs AG 553.5 $3,000 0.74Value Line Leveraged Gr Inv VALLX 1972 26 yrs AG 458.8 $1,000 - 0.86Value Line Spec Situations VALSX 1956 8 yrs AG 126.1 $1,000 - 1.08Van Kampen Aggr Grow A VAGAX 1996 2 yrs AG 126.0 $500 5.8% 1.3Van Wagoner Emerging Growth VWEGX 1995 3 yrs AG 147.5 $1,000 1.88Vanguard Horizon Aggr Growth VHAGX 1995 3 yrs AG 537.9 $3,000 0.4Victory Special Growth SSGSX 1994 2 yrs AG 82.9 $500 5.8% 1.38Vintage Aggressive Growth AVAGX 1995 2 yrs AG 90.1 $1,000 - 1.63Warburg Pincus Adv Post-Vent 1995 3 yrs AG 0.3 $0 1.91Wasatch Aggressive Equity WAAEX 1986 12 yrs AG 123.7 $2,000 1.5WPG Tudor TUDRX 1969 1 yr AG 89.5 $2,500 - 1.24

Mutual Funds— RYD-W PG 27

Total Return (%) $10,000

5-yr Alpha Invested Phone

1994 1995 1996 1997 YTD Avg Yield Beta Index 12/31/98 Number

-4.77% 50.42% 25.54% 42.33% 2.61% 22.02% 1.51 RYD 26,263.20 800-820-0888-6.64% 19.21% 18.13% 17.86% -9.89% 7.55% 1.23 SEC 21,400.38 800-888-24612.58% 35.34% 13.96% 6.23% -10.19% 7.91% 1.2 SHE 42,779.25 800-752-1823-1.65% 35.75% 2.73% 28.58% -1.79% 12.97% 1.32 SMI 40,480.07 800-451-20104.23% 42.50% 10.35% 7.73% -16.73% 8.21% 1.19% 1.42 STA 14,702.97 800-776-01790.51% 32.25% 7.89% 6.40% -11.18% 6.56% 1.23 STA 37,041.28 800-882-005250.72% 20.39% 6.15% -15.38% 11.34% 1.3 STE 33,640.37 800-338-2550-5.68% 34.83% 1.49% 10.85% -11.00% 7.11% 1.02 STR 32,065.42 800-368-1030

. 24.72% -1.06% - 0 STY 12,339.80 800-858-8850

- - - 28.57% - 0 TRA 12,857.00 800-892-7587

-0.81% 50.42% 16.47% 7.56% -11.43% 11.83% 1.32 USA 28,878.10 800-382-8722-3.71% 37.06% 22.31% 23.80% 6.60% 15.62% 1.18 VAL 45,981.21 800-223-08181.03% 28.96% 7.25% 32.10% 1.86% 13.72% 1.02 VAL 32,944.55 800-223-0818

DIVERSIFIED COMMON STOCK COMPANIES

YearOffrd

American Cent-20thC EmgMk Iv TWMIX 1997

BEA Instl Emerg Mkts Eq BEMEX 1993

Bernstein Emerging Mkts Val SNEMX 1995

BlackRock Inti Emerging Inst PIEMX 1994

Consulting Group Emerg Mkts TEMUX 1994

Delaware EMs A DEMAX 1996

Delaware Pooled Emerg Mkts DPEMX 1997

Dresdner RCM Emerging Mkts 1997

Dreyfus Premier Emerg Mkts A - 1998

Driehaus Emerging Mkts Grth - 1997

Eaton Vance Emerging Mkts B EMEMX 1994

Evergreen Emerging Mkts Gr A EMGAX 1994

Federated EMs A EMMAX 1996

Fidelity EMs FEMKX 1990

Glenmede EMs GLEMX 1994

GMO EMs III GMO EX 1993

GMO Evolving Countries III GMCEX 1997

Goldman Sachs Emerg Mkts A GEM AX 1997

Govett Emerging Mkts Eqty A GIEMX 1992

Guardian Baillie Emg Mkts A 1997

Hansberger Instl Emrg Mkts HEMGX 1996

IAI Developing Countries IADCX 1995

Ivy Developing Nations A IVCAX 1994

JP Morgan Emerg Mkts Eqty PPEEX 1993

Kemper Emerging Mkts Grth A 1998

Lazard Emerging Markt Instl LZEMX 1994

Legg Mason Emerging Mkts Pr LMEMX 1996

Lexington Worldwide EmergMkt LEXGX 1969

Managers Emerging Mkts Eqty MEMEX 1998

MAS EMs Value MEMKX 1995

Merrill Lynch Dev Cap Mkts A MADCX 1989

MFS/Foreign Emerging Mkts A MEMAX 1995

Montgomery Emerg Mkts Foe A . 1997

Montgomery Emerging Mkts R MNEMX 1992

Montgomery Instl Emerg Mkts MIEMX 1993

Morgan Grenfell Emg Eq MGEEX 1994

Munder Framlington Emg Mkt Y MFEYX 1997

Nations Emerging Mkts Inv A NEMIX 1995

Nicholas-Apple Emg Ctry A NEC AX 1994

Nicholas-Apple EmgMktBd 1 - 1997

Nicholas-Apple Latin Am 1 - 1997

Oppenheimer Developing Mkt A ODMAX 1996

PaineWebber Emerg Mkts Eq A KPEAX 1994

PaineWebber Pace Inti Emerg PCEMX 1995

Pictet Global Emerging Mkts PTEMX 1995

PIMCo Emerging Mkts Instl PEMIX 1993

EMERGING MARKET (EM)

Mgr

NetAssets Min

Max.Sales Exp.Ten Obj ($MM) Pur Charge Ratio

Mutual Funds— AIM-PIO 29

$10,000 Invested 12/31/98

Phone Number

- 1.33 AIM 6,901.86 800-347-4246

0 AME 7,033.00 800-345-35331.67% 1.22 BEA 4,751.64 800-888-97231.00% 0 BER 5,174.66 212-756-40971.17 BLA 5,117.54 800-441-77622.06% 1.32 CON 6,235.15 212-816-87250.32% 0 DEL 6,081.83 800-523-46400.44% 0 DEL 6,293.00 800-828-50524.09% 1.19 DFA 6,351.04 310-395-8005

0 DRE 7,810.00 800-726-72400.21% 0 DRE 6,857.45 800-373-9387

0 DRE 10,000.00 800-554-4611

0 DRI 7,560.00 800-560-61111.24 EAT 7,472.70 800-225-62650.89 EVE 10,090.67 800-343-2898

. 0 FED 6,755.94 800-341-74003.78% 1.45 FID 6,745.98 800-544-8888

0 FOR 6,612.00 800-456-6710

0 FRE 6,512.50 800-548-45391.08 GLE 5,878.13 800-442-82992.22% 1.18 GMO 6,167.58 617-330-7500

- 0 GMO 10,000.00 617-330-75000.40% 0 GMO 6,120.00 617-330-7500

- 0 GOL 6,396.00 800-526-73842.06% 1.33 GOV 8,802.11 800-821-08030.63% 0 GUA 6,186.00 800-221-32531.46% 0 HAN 4,933.81 954-522-51501.38% 1.13 IAI 6,513.77 800-945-3863

0 IDS 6,358.40 612-671-3733

- 0 INV 10,000.00 800-525-80850.22% 1.27 IVY 5,914.55 800-456-51111.39% 1.19 JP 5,035.07 800-221-7930

. 0 KEM 10,000.00 800-621-10481.41% 1.31 LAZ 7,188.48 800-823-63000.17% 0 LEG 5,705.19 800-577-85890.46% 1.18 LEX 11,100.84 800-526-0056

0 MAN 10,000.00 800-835-38790.82% 1.23 MAS 7,326.82 800-354-81852.58% 1.3 MER 10,961.82 800-637-38630.73% 0 MFS 7,299.67 800-637-2929

. 0 MON 7,680.00 800-695-87581.99% 1.28 MON 8,321.50 800-572-38632.34% 1.26 MON 5,512.16 415-248-6000

. 1.29 MOR 5,461.70 800-550-64260.86% 0 MUN 6,459.00 800-438-57890.98% 1.31 NAT 6,723.89 800-321-78540.20% 1.25 NIC 10,073.23 800-551-804316.57% 0 NIC 6,578.00 800-551-8043

. 0 NIC 6,438.00 800-551-80431.08% 0 OPP 8,104.52 800-525-7048

. 1.18 PAI 5,604.64 800-647-15680.62% 1.21 PAI 6,715.69 800-647-15680.25% 0 PIC 6,277.69 514-288-02531.29 PIM 5,384.02 800-927-4648

DIVERSIFIED COMMON STOCK COMPANIES: EMERGING MARKET (EM), con't.

YearOffrd

Mgr

Ten Obj

NetAssets($MM)

Min

Pur

Max.SalesChargeExp.RatioPrincipal Inti Emerg Mkts A PRIAX 1997 1 yr EM 6.2 $1,000 - 2.03Principal Sp Mkts Inti Emg PSMEX 1997 1 yr EM 67.3 $1,000,000 - 1.15Prudential Developing Mkts A - 1998 N/A EM 0.0 $1,000 5.0% 0Putnam EMs A PMEAX 1995 3 yrs EM 43.5 $500 5.8% 2.1Quantitative Emerg Mkts Ord QFFOX 1994 4 yrs EM 7.0 $5,000 2.56Robertson Stephens Dev CtryA RSDCX 1994 4 yrs EM 7.2 $5,000 2.1Schroder Emg Mkts Instl Inv SCEIX 1995 1 yr EM 103.5 $250,000 1.41Scudder Emerging Mkts Growth SEMGX 1996 1 yr EM 177.6 $2,500 - 2SEI Asset All Div Glob Mod A SAGMX 1996 N/A EM 16.5 $150,000 - 0.12SEI Asset All Div Glob Stk A SAGSX 1996 N/A EM 21.9 $150,000 - 0.12SEI International Emg Mkts A SIEMX 1995 2 yrs EM 504.5 $100,000 . 1.95Seligman Henderson Emrg MktA SHEMX 1996 2 yrs EM 31.3 $1,000 4.8% 2.27Sit Developing Markets Grth SDMGX 1994 4 yrs EM 9.5 $2,000 - 2Smith Barney Emerging Mkts A SMMAX 1995 3 yrs EM 5.2 $1,000 5.0% 2.11SSgA EMs SSEMX 1994 1 yr EM 214.0 $1,000 - 1.25Stein Roe EMs SRMAX 1997 1 yr EM 10.9 $2,500 . 2STI Classic Emg Mkts Eq Tr SCQTX 1997 N/A EM 24.5 $0 - 1.56

T Rowe Price Emerg Mkts Stk PRMSX 1995 3 yrs EM 64.3 $2,500 - 1.75TCW Galileo Emerging Mkt Eq TGEMX 1994 3 yrs EM 13.8 $250,000 - 1.5TCW/DW Emerging Mkts Opp A EMOAX 1994 3 yrs EM 54.4 $1,000 5.3% 1.72Templeton Developing Mkts 1 TEDMX 1991 7 yrs EM 2680.7 $1,000 5.8% 1.96Templeton Instl Emerg Mkts TEEMX 1993 5 yrs EM 1804.8 $5,000,000 - 1.57(JAM Acadian Emerging Mkts AEMGX 1993 1 yr EM 83.2 $100,000 1.5

Van Kampen Emerg Mkts A MSRAX 1994 3 yrs EM 79.4 $500 5.8% 2.15Vanguard Inti Eqty Emerg Mkt VEIEX 1994 4 yrs EM 608.2 $3,000 . 0.57

Wachovia EMs A BTEMX 1994 4 yrs EM 7.8 $250 4.5% 1.79Warburg Pincus Adv Emg Mkts 1994 3 yrs EM 0.0 $0 1.9Warburg Pincus Inst Emg Mkts W1EMX 1996 2 yrs EM 21.6 $2,000,000 * 1.25Winthrop Developing Mkts A WDMAX 1995 2 yrs EM 13.9 $250 5.8% 2.15

Mutual Funds— PRI-W IN 31

Total Return (%) $10,000

5-yr Alpha Invested Phone

1994 1995 1996 1997 YTD Avg Yield Beta Index 12/31/98 Number

- -7.11% 6.32% -1.96% -36.12% * 1.36 VAN 6,185.18 800-421-5666

. 0.56% 15.83% -16.74% -31.23% . 3.35% 1.34 VAN 6,669.32 800-662-7447

. -30.15% - 0 VON 6,985.00 800-527-95007.93% 10.32% -4.02% -36.67% 1.48% 1.23 WAC 7,237.47 800-994-441417.03% 9.74% -20.18% -36.80% - 0.07% 1.38 WAR 6,478.75 800-369-2728

- -14.49% -34.25% 0.29% 0 WAR 5,622.28 800-369-2728

. 4.14% -5.51% -31.35% - - 1.26 WIN 6,755.29 800-225-8011