UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-8352
LKCM Funds
(Exact name of registrant as specified in charter)
c/o Luther King Capital Management Corporation
301 Commerce Street, Suite 1600
Fort Worth, TX 76102
(Address of principal executive offices) (Zip code)
K&L Gates LLP
1601 K Street, NW
Washington, DC 20006
(Name and address of agent for service)
1-800-688-LKCM and 1-800-423-6369
Registrant's telephone number, including area code
Date of fiscal year end: December 31
Date of reporting period: December 31, 2010
Item 1. Reports to Stockholders.
LKCM
FUNDS
LKCM Small Cap Equity Fund
LKCM Equity Fund
LKCM Balanced Fund
LKCM Fixed Income Fund
LKCM International Fund
Annual Report
December 31, 2010
Dear Fellow Shareholders:
We report the following performance information for the LKCM Funds:
Five Year | Ten Year | Avg. | ||||||
One Year | Average | Average | Annual | |||||
Total | Annualized | Annualized | Total | |||||
Net | Gross | Return | Return | Return | Return | |||
Inception | NAV @ | Expense | Expense | Ended | Ended | Ended | Since | |
Funds | Dates | 12/31/10 | Ratio*, ** | Ratio** | 12/31/10 | 12/31/10 | 12/31/10 | Incept. |
LKCM Equity Fund – | ||||||||
Institutional Class | 1/3/96 | $15.18 | 0.80% | 1.14% | 17.77% | 4.98% | 3.10% | 7.22% |
S&P 500 Index1 | 15.06% | 2.29% | 1.41% | 6.70% | ||||
LKCM Small Cap Equity Fund – | ||||||||
Institutional Class | 7/14/94 | $21.49 | 1.01% | 1.01% | 32.98% | 4.14% | 8.13% | 11.16% |
Russell 2000 Index2 | 26.85% | 4.47% | 6.33% | 8.75% | ||||
LKCM Small Cap Equity Fund – | ||||||||
Adviser Class | 6/5/03 | $21.00 | 1.26% | 1.26% | 32.66% | 3.87% | N/A | 9.91% |
Russell 2000 Index2 | 26.85% | 4.47% | N/A | 8.78% | ||||
LKCM International Fund | 12/30/97 | $8.31 | 1.20% | 1.91% | 11.83% | 2.21% | 1.51% | 3.83% |
MSCI/EAFE Index3 | 8.21% | 2.94% | 3.94% | 5.22% | ||||
LKCM Balanced Fund | 12/30/97 | $14.25 | 0.80% | 1.42% | 10.31% | 5.56% | 4.36% | 5.13% |
S&P 500 Index1 | 15.06% | 2.29% | 1.41% | 3.82% | ||||
Barclays Capital U.S. Intermediate | ||||||||
Government/Credit Bond Index4 | 5.89% | 5.53% | 5.51% | 5.69% | ||||
LKCM Fixed Income Fund | 12/30/97 | $11.03 | 0.65% | 0.76% | 5.82% | 5.87% | 5.40% | 5.38% |
Barclays Capital U.S. Intermediate | ||||||||
Government/Credit Bond Index4 | 5.89% | 5.53% | 5.51% | 5.69% |
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-688-LKCM. The Funds impose a 1.00% redemption fee on shares held less than 30 days. If reflected, the fee would reduce performance shown.
* | Excludes acquired fund fees and expenses. The Adviser has contractually agreed to waive all or a portion of its management fee and/or reimburse the Funds to maintain designated expense ratios through April 30, 2011. Investment performance reflects fee waivers, if any, in effect. In the absence of such waivers, total return would be reduced. Investment performance is based upon the net expense ratio. |
** | Expense ratios above are as of December 31, 2009, the Funds’ prior fiscal year end, as reported in the Funds’ most recent prospectus. Expense ratios reported for other periods in the financial highlights of this report may differ. |
1 | The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. |
2 | The Russell 2000 Index is an unmanaged index which measures the performance of the 2,000 smallest companies in the Russell 3000 Index. |
3 | The Morgan Stanley Capital International Europe, Australasia, Far East Index (“MSCI/EAFE”) is an unmanaged index composed of 21 European and Pacific Basin countries. The MSCI/EAFE Index is a recognized international index and is weighted by market capitalization. |
4 | The Barclays Capital U.S. Intermediate Government/Credit Bond Index is an unmanaged market value weighted index measuring both the principal price changes of, and income provided by, the underlying universe of securities that comprise the index. Securities included in the index must meet the following criteria: fixed as opposed to variable rate; remaining maturity of one to ten years; minimum outstanding par value of $250 million; rated investment grade or higher by Moody’s Investors Service or equivalent; must be dollar denominated and non-convertible; and must be publicly issued. |
Note: These indices defined above are not available for direct investment.
Economic Review and Outlook
Government was a common thread throughout 2010, particularly the issue of public sector solvency. In Europe, Greece and Ireland required the support of a European Union bailout fund. The cost of issuing debt rose sharply not only for Greece and Ireland, but also for Portugal and Spain. Domestically, states have resorted to dramatic measures to fill budget gaps. The mismatch between revenue inflows and government outlays provides challenges at every level of government, including municipalities caught short of revenue due to falling property values. We believe debt will continue to grow in importance in the national psyche as solutions are sought to mitigate deficit spending, and the federal deficit will likely be a hallmark issue of the 2012 Presidential race.
The Federal Reserve also found itself in the spotlight this year as some policymakers questioned the Fed’s need for independence, while others questioned the rationale of its dual mandate of price stability and maximum employment. Similar to the first round of quantitative easing, the Fed heavily conditioned the market through a series of speeches by Fed officials, including one by Chairman Bernanke in August. By the time the Fed formally announced the second round of quantitative easing, the treasury market had fully discounted the Fed’s announcement. Treasuries immediately began to sell-off, particularly in the five-year portion of the treasury yield curve where the Fed was expected to be most active.
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In recent history, the combination of monetary stimulus through Fed interest rate cuts and fiscal stimulus through lower taxes and deficit spending has been the financial prescription to broadly stimulate the economy. While deficit spending and taxes will remain in the spotlight, it is monetary policy which is charting a new course. As a result of the second advent of quantitative easing, the U.S. dollar declined slightly in the fourth quarter. The Fed is essentially engineering lower interest rates at a time when many of the world’s central banks are raising rates, or at a minimum maintaining constant interest rates.
The European Union, and specifically the European Central Bank, faced significant challenges in 2010 as it maneuvered to hold the monetary union together through its first significant test as Greece, Portugal, Spain and Ireland struggled with the issuance of sovereign debt. In response, the European Central Bank has been buying sovereign debt and providing liquidity for European banks. We believe what is occurring in Europe is a similar refrain to what transpired in the U.S. mortgage market. Just as the weaker subprime mortgages showed stress first, leading to a series of debt and liquidity problems for stronger institutions, the weaker European Union countries are creating a series of challenges.
The U.S. economy grew at an accelerating rate throughout 2010, with year-over-year real Gross Domestic Product (GDP) growth of 2.4% in the first quarter, 3.0% in the second quarter, 3.2% in the third quarter, and 5.7% in the fourth quarter. Domestic inflation, as measured by the annual change in the Consumer Price Index, declined from a reading of 2.6% in January of 2010 to 1.5% in December of 2010. While it is our view that inflation is not currently a front-burner issue, there is early evidence suggesting an inflationary environment could eventually take hold. For example, the money supply, as measured by the three month moving average of M2, has been growing at a 7% annualized rate. Despite the strong growth in money supply, the velocity of money, or the rate at which each dollar changes hands, continued to decline. If the velocity of money reverses course due to stronger demand for credit by businesses and consumer confidence, we believe the environment would be ripe for inflation, given the growth in money supply and other indications such as the narrowing output gap.
Despite the relatively low Consumer Price Index readings, companies with significant commodity exposure have been exposed to input pricing pressure as emerging market demand remains robust for commodities. The sharp rise in commodity prices in 2010 poses an interesting situation. Over the past 30 years, each Fed easing cycle was accompanied by a decline in commodity prices. The current easing cycle, however, is unfolding against a global demand for goods. The impact of this global demand for raw materials and the general cyclical rebound in the U.S. economy were visible in the sector performance of the S&P 500 Index in 2010, with the Consumer Discretionary, Industrials, Materials and Energy sectors outperforming the S&P 500 Index.
Both the equity market and economy exited 2010 with a good deal of momentum. On the economic front, we believe that the Fed remained extremely accommodative, Washington D.C. appeared committed to further stimulus, inflation appeared low, initial jobless claims data continued to broadly improve, and leading economic indicators improved. We believe the equity market is similarly backed by solid corporate profit growth and reasonable valuations by historical standards, and that corporations will likely transition from capital preservation to capital deployment in the form of hiring, equipment purchases, higher dividends and share buybacks.
In our view, the key economic shift in 2011 should be the transition from the current economic recovery driven by significant stimulus and near-zero interest rates to a self-sustaining expansion. In order for this transition to be successful, we believe real GDP must rebound sufficiently to validate expectations of a sustainable recovery, while not recovering at such a rate to cause the Fed to prematurely tighten monetary policy. Central in the shift to sustainable economic growth is consumer spending, which is largely dependent on employment and consumer confidence.
Although the unemployment rate is likely to remain stubbornly high throughout 2011, directionally the employment picture will have to improve in order for real GDP to grow at the 3% pace that we believe is likely for 2011. The dramatic reduction in labor costs during the recent recession helped to propel corporate profit margins back to near peak levels. If labor costs rise with the rebound in employment, we believe it will have the effect of weighing on corporate profit margins; however, this should be outweighed in the broader GDP equation by sustained consumer spending.
During 2010, a key driver of the equity market was better than expected corporate earnings. Corporate profit margins have rebounded significantly, resulting in approximately 28% growth in S&P 500 Index profits in 2010. The financial sector generated approximately half of this growth, as many banks returned to profitability in 2010. Therefore, we believe the 15.1% return of the S&P 500 Index for 2010 was essentially in-line with the 14% earnings growth that the S&P 500 Index experienced outside the financial sector, implying that there was almost no price-to-earnings multiple expansion in 2010. In our view, the driver of market returns in 2011 is again likely to be corporate earnings growth with only modest price-to-earnings multiple expansion.
We believe global economic news is likely to contribute heavily to headlines again in 2011; in particular, China’s challenge of balancing an economy growing approximately 9.6% year-over-year with the inflationary pressures they are experiencing. As noted earlier, the People’s Bank of China recently tightened interest rates in an attempt to reduce inflation. China is one of several countries which openly criticized the Fed’s second round of quantitative easing, which has the effect of importing inflation into China via a weaker dollar and higher commodity prices. A significant economic policy mistake in China would likely produce a global shockwave and warrants close attention.
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While historical market performance is no guarantee of future results, as we enter 2011, investors clearly have history on their side. This year marks both the third year of an economic expansion and of a presidential cycle. There have only been five such occurrences in the past 111 years of Dow Jones Industrial Average history. The average return of the Dow Jones Industrial Average over these five time periods was approximately 20.6%, with the lowest return being zero in 1947, which also had the distinction of being the second year of a bear market which began in May of 1946. The Presidential cycle alone is historically significant with the market rising approximately 81% of the time in the third year of a Presidential term over the past 111 years.
LKCM Equity Fund
The LKCM Equity Fund outperformed the S&P 500 Index during the year ended December 31, 2010. The largest contribution to the Fund’s outperformance resulted from securities selection, particularly in the Information Technology and Consumer Discretionary sectors. The Fund also had meaningful, positive attribution from securities selection in the Materials and Healthcare sectors. Stock selection in the Energy, Industrials and Consumer Staples sectors detracted from performance. Overall, securities selection accounted for approximately three quarters of the outperformance. The biggest positive contribution in sector allocation came through our decision to overweight Materials, while the Fund’s cash position detracted from relative performance. During the period, the Fund maintained overweight allocations in Materials, Industrials and Consumer Discretionary, while remaining underweight in Financials, Utilities and Consumer Staples. We believe that the Fund’s concentration on what we believe are high quality companies can continue to add value for the Fund and its shareholders.
Total Return | ||
Year Ended | ||
December 31, 2010 | ||
LKCM Equity Fund | 17.77% | |
S&P 500 Index | 15.06% |
LKCM Small Cap Equity Fund
The LKCM Small Cap Equity Fund outperformed the Russell 2000 Index during the year ended December 31, 2010. The Fund’s performance benefited from stock selection within the Information Technology, Consumer Discretionary, Industrials, and Energy sectors. The Fund’s performance was also enhanced by an overweight allocation in the Energy sector and an underweight allocation in the Financials sector. Stock selection in the Financials and Materials sectors pressured returns for the period. We continue to believe the Fund is positioned with a strong emphasis on high quality companies with internal growth prospects that should experience solid improvement from the anticipated economic expansion. We believe investments in these types of companies can continue to add value for the Fund and its shareholders.
Total Return | ||
Year Ended | ||
December 31, 2010 | ||
LKCM Small Cap Equity Fund | 32.98% | |
Russell 2000 Index | 26.85% |
LKCM Balanced Fund
Both the fixed income and equity components of the LKCM Balanced Fund played important roles during 2010. Positive returns from the fixed income sector helped to cushion the Fund against downside volatility during the difficult stock market environment of the first half of the year. As the stock market recovered and moved higher during the last half of the year, the equity component contributed the majority of the Fund’s performance. From a relative return standpoint, stock selection was particularly strong in the Information Technology and Materials sectors, while the Consumer Staples and Energy sectors detracted from performance. Our investment strategy continues to focus on managing the overall risk level of the portfolio by emphasizing diversification and quality in a blend of asset classes.
Total Return | ||
Year Ended | ||
December 31, 2010 | ||
LKCM Balanced Fund | 10.31% | |
S&P 500 Index | 15.06% | |
Barclays Capital U.S. Intermediate Government/Credit Bond Index | 5.89% |
LKCM Fixed Income Fund
The LKCM Fixed Income Fund is managed to seek current income. The Fund primarily invests in a diversified portfolio of investment grade corporate bonds as well as government securities with short and intermediate maturities from one to ten years. Our strategy focus in managing the Fund is primarily to select corporate bonds we feel have strong credit profiles and attractive yields relative to those offered on U.S. Treasury and government-agency debt. During 2010, the total return for the Fund was 5.82% versus 5.89% for the Barclays Capital
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U.S. Intermediate Government/Credit Bond Index. As of December 31, 2010, the total net assets in the Fund were $162.4 million, of which 90.6% was invested in corporate bonds, 5.2% was invested in U.S. Treasury and government-agency debt, 0.5% was invested in preferred stock, and 3.7% was invested in cash reserves, net of liabilities.
At December 31, 2010, the Fund had an effective duration of 3.1 years. While the Fund’s concentration in credit (i.e., corporate bonds) relative to government debt was additive to performance throughout the year, the shorter duration detracted from performance during the first half of the year. That trend reversed sharply, especially during the fourth quarter, as yields backed up and prices fell causing longer duration assets to underperform shorter duration assets. The Fund’s defensive duration posture, relative to the 3.9 year duration for the benchmark, was the major contributor to overall performance during the second half of the year. The Fund’s overweight positions in the Consumer, Industrials and Materials sectors all contributed positively to performance.
Total Return | ||
Year Ended | ||
December 31, 2010 | ||
LKCM Fixed Income Fund | 5.82% | |
Barclays Capital U.S. Intermediate Government/Credit Bond Index | 5.89% |
LKCM International Fund
The LKCM International Fund is sub-advised by TT International. A detailed performance report for the Fund for the year ended December 31, 2010 can be found on page 6.
J. Luther King, Jr., CFA
February 4, 2011
The information provided herein represents the opinion of J. Luther King, Jr. and is not intended to be a forecast of future events, a guarantee of future results, nor investment advice.
Please refer to the Schedule of Investments found on pages 17-31 of the report for more information on Fund holdings. Fund holdings and sector allocations are subject to change and are not recommendations to buy or sell any securities.
Mutual fund investing involves risk. Principal loss is possible. Past performance is not a guarantee of future results. Small and medium capitalization funds typically carry additional risks, since smaller companies generally have a higher risk of failure, and, historically, their stocks have experienced a greater degree of market volatility than stocks on average. Investments in debt securities typically decrease in value when interest rates rise. This risk is greater for longer-term debt securities. International investing involves special risk considerations, including fluctuating foreign exchange rates, more limited information available about issuers of securities, foreign government regulations and differing degrees of liquidity, that may adversely affect portfolio securities. The risks associated with foreign investments are heightened when investing in emerging markets. These risks are discussed in the Fund’s summary and statutory prospectuses.
The LKCM International Fund may also use options and futures contracts, which have the risks of unlimited losses of the underlying holdings due to unanticipated market movements and failure to correctly predict the direction of securities prices, interest rates and currency exchange rates. Because the Fund may also invest in options and futures contracts, it therefore may not be suitable for all investors.
Current and future portfolio holdings are subject to risk.
Diversification does not assure a profit nor protect against loss in a declining market.
The Dow Jones Industrial Average is a price weighted average of 30 actively traded shares of U.S. industrial corporations listed on the New York Stock Exchange. You cannot invest directly in an index.
Earnings growth is a key indicator for measuring a company’s success and can be a driving force behind stock price appreciation. Put simply, earnings growth is the percentage gain in net income over time.
Earnings multiple: The earnings multiple of a stock, also called the price/earnings (P/E) ratio, is the share price divided by the earnings per share. The earnings multiple is often based on the prior twelve months of earnings data.
Duration is a commonly used measure of the potential volatility of the price of a debt security, or the aggregate market value of a portfolio of debt securities, prior to maturity. Securities with a longer duration generally have more volatile prices than securities of comparable quality with a shorter duration.
Earnings momentum is the increase of earnings per share at an increasing rate.
Free cash flow is a measure of financial performance calculated as operating cash flow minus capital expenditures.
Must be preceded or accompanied by a prospectus.
Quasar Distributors, LLC, distributor.
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Report from TT International
The LKCM International Fund seeks to achieve a total return in excess of the total return of the Morgan Stanley Capital International Europe, Australasia and Far East Index (“MSCI EAFE”) Index.
Year Ended December 31, 2010
LKCM International Fund: 11.83%
MSCI/EAFE Index: 8.21%
Performance
The Fund produced a positive absolute return of 11.83% for the year ended December 31, 2010, ahead of its benchmark, the MSCI EAFE Index, which returned 8.21%.
The Fund’s outperformance was primarily due to positive security selection in Europe and Japan. In the former, security selection in the Financials sector was a big positive factor due to not holding Spanish banks which were negatively affected by concerns over sovereign debt in Europe and the Spanish economy. In a year in which stock performance was strongly correlated to earnings acceleration in security selection in the Consumer Discretionary sector proved to be another highlight for the Fund. This was primarily due to auto stocks, particularly Volkswagen, which outperformed the market by over 70% on the back of a stellar operating performance which saw the group achieve annual sales of more than 7 million cars for the first time in its history. Auto makers particularly benefited from strong demand in Asia, especially for higher end models. The positions in Daimler, Porsche and Continental also made a positive contribution to performance over the year. Richemont, the Swiss luxury watch retailer, which the Fund held over the second half of the year, made a positive contribution to performance as demand for luxury goods among the growing number of aspirational middle class consumers in Asia helped the group deliver strong earnings growth. In Japan, stock selection in the Industrials and Information Technology sectors was a notable positive.
Markets
The recovery in equity markets, which began in 2009, remained intact in 2010, though gains were considerably more modest in the face of much greater headwinds. These came in the form of a general crisis of confidence in the strength and sustainability of the economic recovery in the developed world, fears of a possible sovereign default in peripheral Europe, and of the impact of Chinese tightening. Weighed against these factors were continued loose monetary conditions in the developed world, ongoing evidence of a strong corporate sector recovery, which has seen a sustained improvement in earnings momentum, notably better than expected economic growth in certain developed countries such as Germany, and strong growth in emerging economies.
Conditions in the first half of the year, when markets were preoccupied with macro risks from European sovereign debt to fears of a double dip recession in the U.S., were extremely volatile and challenging. The year had barely got going before the newly elected government of Greece revealed that the previous administration had hidden a massive shortfall in the public finances. With the Dubai debt default of 4Q09 still fresh in the memory of investors, the revelation aroused fears of a systemic sovereign debt problem and markets fell sharply. However, February saw markets rebound supported by positive corporate earnings data and there were further small gains in March. In many ways this set the tone for the rest of the year. Volatility was rarely far away as investors regularly found themselves caught between on the one hand fears over the problems in peripheral Europe, Chinese tightening and the possibility of a double dip recession, and on the other, positive corporate earnings. In the first half of the year, patchy macroeconomic data only served to exacerbate the dilemma facing investors. The second quarter proved to be the most volatile of the year with equities reaching a low point in May as, in addition to ongoing fears over peripheral Europe and the possibility of Chinese tightening, investors fretted over U.S. financial regulation and geopolitical tensions in Asia. In a painful quarter for equities most sectors took heavy losses.
Markets regained their poise in the second half of the year, rebounding strongly from oversold levels. The corporate sector continued to deliver positive results but markets also found extra support from better than expected macroeconomic data from Europe where Germany enjoyed its best quarter of economic growth in the second quarter since it was reunified in 1990. While concerns over China, peripheral Europe, a possible U.S. double dip and inflation remained, with hindsight the middle of the year does appear to have marked the point at which stock level fundamentals, particularly earnings momentum, began to outweigh macro concerns while investors realized that equities had fallen to attractive valuation levels. As a result, the third quarter turned out to be a strong period for equities. Within this the major winners were auto stocks which performed well due to stronger than expected auto sales particularly in Asia. The positive performance carried over into the final quarter of the year when markets continued to be supported by positive earnings momentum and as the U.S. Federal Reserve moved closer towards further quantitative easing.
Outlook
We anticipate the global economic recovery to continue in 2011 led by manufacturing and growth in Asia. As such, we maintain our conviction and belief that Materials, Industrials and Consumer Discretionary, particularly capital goods, stocks should continue to deliver
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good earnings growth in 2011. We believe equities remain attractive and arguably underowned as an asset class. We also believe valuations are still inexpensive (for example, with Japanese equities), with shareholder returns and earnings rising steadily. In our view, the economic and monetary backdrop is supportive for equities as the risk of a double dip continues to look minimal with global indicators consistent with over 4% global GDP growth in 2011, liquidity remains abundant, and earnings momentum is positive. The corporate sector has a massive financial surplus. Free cash flow is at a record high and investment as a share of GDP at a record low, so we believe the stage is set for a strong pick up in business investment in 2011 as well as share buybacks and M&A (Mergers & Acquisitions). Taking these various factors together, it seems reasonable in our view to expect developed equity markets to deliver returns at least in line with 2010 in the coming year.
Recent developments pertaining to the crisis in peripheral Europe have been positive and the mood music seems to be changing in favor of some kind of deal between Germany and its peripheral neighbors. In January 2011, this was reflected in narrowing spreads on peripheral European sovereign debt, but we believe it would be wrong to think the problem is now solved. The obstacles to a “pact of competitiveness” that would force countries to coordinate their national policies on issues such as tax, wages and retirement ages are many. In our view, the real economy meanwhile continues to look good and confidence remains high in Germany and rising in other parts of Europe. The gap between Germany and the rest remains wide; the German manufacturing sector is now operating at slightly above normal capacity, which we believe augurs well for capital expenditures and hiring. However, there are signs that Germany’s economic recovery is sustaining manufacturing in other parts of Europe. The French manufacturing sentiment index saw its biggest monthly rise for over ten years. But Europe now faces another challenge in the form of rising inflation and higher input prices. Despite the growing speculation, we do not expect a rate hike by the ECB (European Central Bank) any time soon.
There has been some concern lately that Japan’s economy may have hit the buffers, but, in our view, happily it appears to be returning to growth in our view. The main reason for this is the pick up in exports due to strong demand coming from China and the U.S. The trouble for Japan is that it remains closely tied to the global economy and particularly Asia. These are buoyant at present, but as central banks start to tighten this could well dampen demand in Asia. However, there are signs that consumption in Japan could do better than expected going forward and the improved productivity of Japanese companies should keep the economy on a solid footing.
There remains a significant concern that Asia and particularly China are overheating. The People’s Bank of China will most likely continue to implement tightening monetary measures, but we believe fiscal policy will remain accommodative, if not loose, and the economy will continue to grow strongly. Intra-Asia trade has been healthy of late and most Asian economies saw a pick up in industrial production in December due to growth in Chinese imports, but as with China most are also behind the curve in terms of monetary policy and will most likely have to tighten this year.
TT International
February 14, 2011
Past performance is not a guarantee of future results.
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PERFORMANCE:
The following information illustrates the historical performance of LKCM Small Cap Equity Fund as of December 31, 2010 compared to the Fund’s representative market indices.
Performance data quoted represents past performance; past performance does not guarantee future results. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-688-LKCM.
An index is an unmanaged portfolio and does not trade or incur any expenses. One can not invest in an unmanaged index.
AVERAGE ANNUAL TOTAL RETURN | ||||
Past | Past | Past | Since | |
1 Year | 5 Years | 10 Years | Inception(1) | |
LKCM Small Cap Equity Fund – Institutional Class | 32.98% | 4.14% | 8.13% | 11.16% |
Russell 2000 Index | 26.85% | 4.47% | 6.33% | 8.75% |
Lipper Small-Cap Core Funds Index | 25.71% | 4.76% | 6.95% | 10.04% |
(1) July 14, 1994
A HYPOTHETICAL $10,000 INVESTMENT IN LKCM SMALL CAP EQUITY FUND – INSTITUTIONAL CLASS
(for the ten years ended December 31, 2010)
The Russell 2000 Index is an unmanaged index consisting of the 2,000 smallest companies in the Russell 3000 Index.
The Lipper Small-Cap Core Funds Index is an index of small cap core mutual funds tracked by Lipper, Inc.
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AVERAGE ANNUAL TOTAL RETURN | ||||
Past | Past | Past | Since | |
1 Year | 3 Years | 5 Years | Inception(1) | |
LKCM Small Cap Equity Fund – Adviser Class | 32.66% | 2.13% | 3.87% | 9.91% |
Russell 2000 Index | 26.85% | 2.22% | 4.47% | 8.78% |
Lipper Small-Cap Core Funds Index | 25.71% | 2.88% | 4.76% | 9.77% |
(1) June 5, 2003
A HYPOTHETICAL $10,000 INVESTMENT IN LKCM SMALL CAP EQUITY FUND – ADVISER CLASS
(for the period from June 5, 2003 through December 31, 2010)
The Russell 2000 Index is an unmanaged index consisting of the 2,000 smallest companies in the Russell 3000 Index.
The Lipper Small-Cap Core Funds Index is an index of small cap core mutual funds tracked by Lipper, Inc.
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PERFORMANCE:
The following information illustrates the historical performance of LKCM Equity Fund as of December 31, 2010 compared to the Fund’s representative market indices.
Performance data quoted represents past performance; past performance does not guarantee future results. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-688-LKCM.
An index is an unmanaged portfolio and does not trade or incur any expenses. One can not invest in an unmanaged index.
AVERAGE ANNUAL TOTAL RETURN | ||||
Past | Past | Past | Since | |
1 Year | 5 Years | 10 Years | Inception(1) | |
LKCM Equity Fund – Institutional Class | 17.77% | 4.98% | 3.10% | 7.22% |
S&P 500 Index | 15.06% | 2.29% | 1.41% | 6.70% |
Lipper Large-Cap Core Funds Index | 12.77% | 1.91% | 0.76% | 5.85% |
(1) January 3, 1996
A HYPOTHETICAL $10,000 INVESTMENT IN LKCM EQUITY FUND – INSTITUTIONAL CLASS
(for the ten years ended December 31, 2010)
The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The Lipper Large-Cap Core Funds Index is an index of large cap core mutual funds tracked by Lipper, Inc.
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PERFORMANCE:
The following information illustrates the historical performance of LKCM Balanced Fund as of December 31, 2010 compared to the Fund’s representative market indices.
Performance data quoted represents past performance; past performance does not guarantee future results. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-688-LKCM.
An index is an unmanaged portfolio and does not trade or incur any expenses. One can not invest in an unmanaged index.
AVERAGE ANNUAL TOTAL RETURN | ||||
Past | Past | Past | Since | |
1 Year | 5 Years | 10 Years | Inception(1) | |
LKCM Balanced Fund | 10.31% | 5.56% | 4.36% | 5.13% |
Barclays Capital U.S. Intermediate Government/Credit Bond Index | 5.89% | 5.53% | 5.51% | 5.69% |
S&P 500 Index | 15.06% | 2.29% | 1.41% | 3.82% |
Lipper Mixed-Asset Target Allocation Growth Funds Index | 12.55% | 4.04% | 4.39% | 5.14% |
(1) December 30, 1997
A HYPOTHETICAL $10,000 INVESTMENT IN LKCM BALANCED FUND
(for the ten years ended December 31, 2010)
The Barclays Capital U.S. Intermediate Government/Credit Bond Index is an unmanaged market value weighted index measuring both the principal price changes of, and income provided by, the underlying universe of securities that comprise the index. Securities included in the index must meet the following criteria: fixed as opposed to variable rate; remaining maturity of one to ten years; minimum outstanding par value of $250 million; rated investment grade or higher by Moody’s Investors Service or equivalent; must be dollar denominated and non-convertible; and must be publicly issued.
The Lipper Mixed-Asset Target Allocation Growth Funds Index is an unmanaged index consisting of funds that, by portfolio practice, maintain a mix of between 60%-80% equity securities, with the remainder invested in bonds, cash and cash equivalents.
The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
11
PERFORMANCE:
The following information illustrates the historical performance of LKCM Fixed Income Fund as of December 31, 2010 compared to the Fund’s representative market indices.
Performance data quoted represents past performance; past performance does not guarantee future results. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-688-LKCM.
An index is an unmanaged portfolio and does not trade or incur any expenses. One can not invest in an unmanaged index.
AVERAGE ANNUAL TOTAL RETURN | ||||
Past | Past | Past | Since | |
1 Year | 5 Years | 10 Years | Inception(1) | |
LKCM Fixed Income Fund | 5.82% | 5.87% | 5.40% | 5.38% |
Barclays Capital U.S. Intermediate Government/Credit Bond Index | 5.89% | 5.53% | 5.51% | 5.69% |
Lipper Short Intermediate Investment-Grade Debt Funds Index | 5.86% | 4.81% | 4.67% | 4.94% |
(1) December 30, 1997
A HYPOTHETICAL $10,000 INVESTMENT IN LKCM FIXED INCOME FUND
(for the ten years ended December 31, 2010)
The Barclays Capital U.S. Intermediate Government/Credit Bond Index is an unmanaged market value weighted index measuring both the principal price changes of, and income provided by, the underlying universe of securities that comprise the index. Securities included in the index must meet the following criteria: fixed as opposed to variable rate; remaining maturity of one to ten years; minimum outstanding par value of $250 million; rated investment grade or higher by Moody’s Investors Service or equivalent; must be dollar denominated and non-convertible; and must be publicly issued.
The Lipper Short Intermediate Investment-Grade Debt Funds Index is an index of short intermediate investment grade mutual funds tracked by Lipper, Inc.
12
PERFORMANCE:
The following information illustrates the historical performance of LKCM International Fund as of December 31, 2010 compared to the Fund’s representative market indices.
Performance data quoted represents past performance; past performance does not guarantee future results. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-688-LKCM.
An index is an unmanaged portfolio and does not trade or incur any expenses. One can not invest in an unmanaged index.
AVERAGE ANNUAL TOTAL RETURN | ||||
Past | Past | Past | Since | |
1 Year | 5 Years | 10 Years | Inception(1) | |
LKCM International Fund | 11.83% | 2.21% | 1.51% | 3.83% |
MSCI/EAFE Index(2) | 8.21% | 2.94% | 3.94% | 5.22% |
Lipper International Multi-Cap Value Funds Index | 10.40% | 3.37% | 5.96% | 6.85% |
(1) December 30, 1997
(2) Morgan Stanley Capital International Europe, Australasia, Far East Index
A HYPOTHETICAL $10,000 INVESTMENT IN LKCM INTERNATIONAL FUND
(for the ten years ended December 31, 2010)
The Morgan Stanley Capital International Europe Australasia, Far East Index (“MSCI/EAFE”) is an unmanaged index composed of 21 European and Pacific Basin countries. The MSCI/EAFE Index is a recognized international index and is weighted by market capitalization.
The Lipper International Multi-Cap Value Funds Index is an index of international multi-cap value mutual funds tracked by Lipper, Inc.
13
LKCM Funds Expense Example — December 31, 2010
As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including redemption fees; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (7/1/10-12/31/10).
ACTUAL EXPENSES
The first line of the tables below provides information about actual account values and actual expenses. Although the Funds charge no sales load, you will be assessed fees for outgoing wire transfers, returned checks and stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Funds’ transfer agent. If you request that a redemption be made by wire transfer, currently a $15.00 fee is charged by the Funds’ transfer agent. You will be charged a redemption fee equal to 1.00% of the net amount of the redemption if you redeem your shares of the LKCM Small Cap Equity, Equity, Balanced, Fixed Income and International Funds within 30 days of purchase. To the extent the Funds invest in shares of other investment companies as part of its investment strategy, you will indirectly bear your proportionate share of any fees and expenses charged by the underlying funds in which the Funds invest in addition to the expenses of the Funds. Actual expenses of the underlying funds are expected to vary among the various underlying funds. These expenses are not included in the example below. The example below includes management fees, registration fees and other expenses. However, the example below does not include portfolio trading commissions and related expenses and other extraordinary expenses as determined under generally accepted accounting principles. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLES FOR COMPARISON PURPOSES
The second line of the tables below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which are not the Funds’ actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactions costs were included, your costs would have been higher.
LKCM Small Cap Equity Fund – Institutional Class | |||||
Beginning | Ending | Expenses Paid | |||
Account Value | Account Value | During Period* | |||
7/1/10 | 12/31/10 | 7/1/10 – 12/31/10 | |||
Actual | $1,000.00 | $1,339.80 | $5.66 | ||
Hypothetical (5% return before expense) | $1,000.00 | $1,020.37 | $4.89 |
* | Expenses are equal to the Fund’s annualized net expense ratio of 0.96%, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. |
LKCM Small Cap Equity Fund – Adviser Class | |||||
Beginning | Ending | Expenses Paid | |||
Account Value | Account Value | During Period* | |||
7/1/10 | 12/31/10 | 7/1/10 – 12/31/10 | |||
Actual | $1,000.00 | $1,338.40 | $7.13 | ||
Hypothetical (5% return before expense) | $1,000.00 | $1,019.11 | $6.16 |
* | Expenses are equal to the Fund’s annualized net expense ratio of 1.21%, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. |
14
LKCM Equity Fund | |||||
Beginning | Ending | Expenses Paid | |||
Account Value | Account Value | During Period* | |||
7/1/10 | 12/31/10 | 7/1/10 – 12/31/10 | |||
Actual | $1,000.00 | $1,227.70 | $4.49 | ||
Hypothetical (5% return before expense) | $1,000.00 | $1,021.17 | $4.08 |
* | Expenses are equal to the Fund’s annualized net expense ratio of 0.80%, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. |
LKCM Balanced Fund | |||||
Beginning | Ending | Expenses Paid | |||
Account Value | Account Value | During Period* | |||
7/1/10 | 12/31/10 | 7/1/10 – 12/31/10 | |||
Actual | $1,000.00 | $1,149.10 | $4.33 | ||
Hypothetical (5% return before expense) | $1,000.00 | $1,021.17 | $4.08 |
* | Expenses are equal to the Fund’s annualized net expense ratio of 0.80%, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. |
LKCM Fixed Income Fund | |||||
Beginning | Ending | Expenses Paid | |||
Account Value | Account Value | During Period* | |||
7/1/10 | 12/31/10 | 7/1/10 – 12/31/10 | |||
Actual | $1,000.00 | $1,021.10 | $3.31 | ||
Hypothetical (5% return before expense) | $1,000.00 | $1,021.93 | $3.31 |
* | Expenses are equal to the Fund’s annualized net expense ratio of 0.65%, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. |
LKCM International Fund | |||||
Beginning | Ending | Expenses Paid | |||
Account Value | Account Value | During Period* | |||
7/1/10 | 12/31/10 | 7/1/10 – 12/31/10 | |||
Actual | $1,000.00 | $1,281.70 | $6.90 | ||
Hypothetical (5% return before expense) | $1,000.00 | $1,019.16 | $6.11 |
* | Expenses are equal to the Fund’s annualized net expense ratio of 1.20%, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. |
15
ALLOCATION OF PORTFOLIO HOLDINGS — LKCM Funds — December 31, 2010
Percentages represent market value as a percentage of total investments.
LKCM Small Cap Equity Fund | LKCM Equity Fund |
LKCM Balanced Fund | LKCM Fixed Income Fund |
LKCM International Fund | |
16
LKCM Small Cap Equity Fund |
Schedule of Investments |
December 31, 2010
COMMON STOCKS - 97.4% | Shares | Value | |||||||
Aerospace & Defense - 1.4% | |||||||||
Hexcel Corporation (a) | 556,100 | $ | 10,059,849 | ||||||
Air Freight & Logistics - 2.1% | |||||||||
Forward Air Corporation | 253,350 | 7,190,073 | |||||||
UTI Worldwide, Inc. (b) | 399,850 | 8,476,820 | |||||||
15,666,893 | |||||||||
Auto Components - 1.8% | |||||||||
LKQ Corporation (a) | 319,100 | 7,249,952 | |||||||
Westport Innovations Inc. (a) (b) | 314,665 | 5,827,596 | |||||||
13,077,548 | |||||||||
Capital Markets - 1.1% | |||||||||
Raymond James Financial, Inc. | 248,400 | 8,122,680 | |||||||
Chemicals - 1.9% | |||||||||
Calgon Carbon Corporation (a) | 386,800 | 5,848,416 | |||||||
Cytec Industries Inc. | 158,200 | 8,394,092 | |||||||
14,242,508 | |||||||||
Commercial Banks - 5.5% | |||||||||
First Horizon National Corporation | 531,858 | 6,265,285 | |||||||
Glacier Bancorp, Inc. | 470,530 | 7,109,708 | |||||||
Home Bancshares Inc. | 261,050 | 5,750,931 | |||||||
Prosperity Bancshares, Inc. | 228,650 | 8,981,372 | |||||||
Texas Capital Bancshares, Inc. (a) | 302,600 | 6,436,302 | |||||||
Umpqua Holdings Corporation | 478,250 | 5,825,085 | |||||||
40,368,683 | |||||||||
Commercial Services & Supplies - 2.8% | |||||||||
Administaff, Inc. | 383,700 | 11,242,410 | |||||||
Interface, Inc. - Class A | 588,150 | 9,204,547 | |||||||
20,446,957 | |||||||||
Communications Equipment - 0.7% | |||||||||
Arris Group Inc. (a) | 480,600 | 5,392,332 | |||||||
Computers & Peripherals - 3.8% | |||||||||
Brocade Communications | |||||||||
Systems, Inc. (a) | 1,691,200 | 8,946,448 | |||||||
Compellent Technologies, Inc. (a) | 421,900 | 11,640,221 | |||||||
SMART Technologies Inc. - Class A (a) (b) | 796,550 | 7,519,432 | |||||||
28,106,101 | |||||||||
Consumer Finance - 2.4% | |||||||||
Cash America International, Inc. | 213,825 | 7,896,557 | |||||||
First Cash Financial Services, Inc. (a) | 317,051 | 9,825,411 | |||||||
17,721,968 | |||||||||
Containers & Packaging - 1.0% | |||||||||
Silgan Holdings Inc. | 205,150 | 7,346,422 | |||||||
Distributors - 1.7% | |||||||||
WESCO International, Inc. (a) | 237,575 | 12,543,960 | |||||||
Diversified Consumer Services - 2.5% | |||||||||
American Public Education Inc. (a) | 252,600 | 9,406,824 | |||||||
Capella Education Company (a) | 140,100 | 9,327,858 | |||||||
18,734,682 | |||||||||
Diversified Manufacturing - 0.9% | |||||||||
Raven Industries, Inc. | 134,400 | 6,409,536 | |||||||
Electrical Equipment - 1.1% | |||||||||
Belden Inc. | 224,750 | 8,275,295 | |||||||
Electronic Equipment & Instruments - 3.4% | |||||||||
National Instruments Corporation | 238,000 | 8,958,320 | |||||||
Rofin-Sinar Technologies, Inc. (a) | 224,450 | 7,954,508 | |||||||
Trimble Navigation Limited (a) | 204,150 | 8,151,710 | |||||||
25,064,538 | |||||||||
Energy Equipment & Services - 3.6% | |||||||||
CARBO Ceramics Inc. | 90,750 | 9,396,255 | |||||||
Core Laboratories N.V. (b) | 80,700 | 7,186,335 | |||||||
Dril-Quip, Inc. (a) | 127,325 | 9,895,699 | |||||||
26,478,289 | |||||||||
Food & Staples Retailing - 1.3% | |||||||||
Ruddick Corporation | 213,000 | 7,846,920 | |||||||
SunOpta Inc. (a) (b) | 221,337 | 1,730,855 | |||||||
9,577,775 | |||||||||
Health Care Equipment & Supplies - 2.0% | |||||||||
American Medical Systems | |||||||||
Holdings, Inc. (a) | 368,750 | 6,954,625 | |||||||
Zoll Medical Corporation (a) | 201,050 | 7,485,091 | |||||||
14,439,716 | |||||||||
Health Care Providers & Services - 6.4% | |||||||||
Health Management | |||||||||
Associates Inc. - Class A (a) | 814,500 | 7,770,330 | |||||||
HMS Holdings Corporation (a) | 136,300 | 8,828,151 | |||||||
MWI Veterinary Supply, Inc. (a) | 205,900 | 13,002,585 | |||||||
PAREXEL International Corporation (a) | 471,650 | 10,013,130 | |||||||
PSS World Medical, Inc. (a) | 327,900 | 7,410,540 | |||||||
47,024,736 | |||||||||
Hotels, Restaurants & Leisure - 2.5% | |||||||||
BJ’s Restaurants, Inc. (a) | 158,700 | 5,622,741 | |||||||
Buffalo Wild Wings Inc. (a) | 109,300 | 4,792,805 | |||||||
LIFE TIME FITNESS, Inc. (a) | 187,907 | 7,702,308 | |||||||
18,117,854 | |||||||||
Household Durables - 1.0% | |||||||||
Tempur-Pedic International Inc. (a) | 186,650 | 7,477,199 | |||||||
Insurance - 0.5% | |||||||||
AmTrust Financial Services, Inc. | 223,450 | 3,910,375 | |||||||
Internet Software & Services - 2.1% | |||||||||
Digital River, Inc. (a) | 217,000 | 7,469,140 | |||||||
LogMeIn, Inc. (a) | 183,650 | 8,143,041 | |||||||
15,612,181 | |||||||||
Investment Bank & Brokerage - 0.9% | |||||||||
Evercore Partners, Inc. - Class A | 184,296 | 6,266,064 |
The accompanying notes are an integral part of these financial statements.
17
LKCM Small Cap Equity Fund |
Schedule of Investments, Continued |
December 31, 2010
COMMON STOCKS | Shares | Value | |||||||
Leisure Equipment & Products - 1.7% | |||||||||
Brunswick Corporation | 348,375 | $ | 6,528,547 | ||||||
RC2 Corporation (a) | 277,450 | 6,040,087 | |||||||
12,568,634 | |||||||||
Life Sciences Tools & Services - 1.9% | |||||||||
Dionex Corporation (a) | 48,821 | 5,761,366 | |||||||
PerkinElmer, Inc. | 329,800 | 8,515,436 | |||||||
14,276,802 | |||||||||
Machinery - 7.3% | |||||||||
Actuant Corporation - Class A | 306,100 | 8,148,382 | |||||||
Astec Industries, Inc. (a) | 264,400 | 8,569,204 | |||||||
CIRCOR International, Inc. | 212,900 | 9,001,412 | |||||||
CLARCOR Inc. | 187,400 | 8,037,586 | |||||||
EnPro Industries, Inc. (a) | 190,800 | 7,929,648 | |||||||
Kaydon Corporation | 83,550 | 3,402,156 | |||||||
The Middleby Corporation (a) | 102,950 | 8,691,039 | |||||||
53,779,427 | |||||||||
Marine - 0.9% | |||||||||
Kirby Corporation (a) | 145,850 | 6,424,693 | |||||||
Media - 2.8% | |||||||||
Cinemark Holdings, Inc. | 332,850 | 5,738,334 | |||||||
Live Nation Inc. (a) | 619,100 | 7,070,122 | |||||||
National CineMedia, Inc. | 372,700 | 7,420,457 | |||||||
20,228,913 | |||||||||
Metals & Mining - 2.5% | |||||||||
Carpenter Technology Corporation | 264,550 | 10,645,492 | |||||||
Haynes International, Inc. | 176,103 | 7,366,388 | |||||||
18,011,880 | |||||||||
Oil & Gas Drilling - 0.8% | |||||||||
Atwood Oceanics, Inc. (a) | 151,800 | 5,672,766 | |||||||
Oil & Gas Exploration & | |||||||||
Production Companies - 6.7% | |||||||||
Approach Resources Inc. (a) | 310,003 | 7,161,069 | |||||||
Brigham Exploration Company (a) | 440,650 | 12,003,306 | |||||||
Oasis Petroleum Inc. (a) | 281,450 | 7,632,924 | |||||||
Rosetta Resources, Inc. (a) | 339,253 | 12,769,483 | |||||||
SM Energy Company | 166,800 | 9,829,524 | |||||||
49,396,306 | |||||||||
Pharmaceuticals - 0.9% | |||||||||
Endo Pharmaceuticals Holdings Inc. (a) | 177,550 | 6,340,311 | |||||||
Semiconductor & Semiconductor | |||||||||
Equipment - 1.1% | |||||||||
Emulex Corporation (a) | 695,200 | 8,106,032 | |||||||
Software - 6.5% | |||||||||
ANSYS, Inc. (a) | 140,815 | 7,332,237 | |||||||
Aspen Technology, Inc. (a) | 594,400 | 7,548,880 | |||||||
MedAssets Inc. (a) | 348,200 | 7,030,158 | |||||||
MicroStrategy Incorporated - Class A (a) | 85,550 | 7,311,958 | |||||||
Pegasystems Inc. | 233,783 | 8,563,471 | |||||||
TIBCO Software Inc. (a) | 505,150 | 9,956,507 | |||||||
47,743,211 | |||||||||
Specialty Retail - 7.7% | |||||||||
DSW Inc. - Class A (a) | 270,700 | 10,584,370 | |||||||
Group 1 Automotive, Inc. | 146,550 | 6,119,928 | |||||||
Hibbett Sports Inc. (a) | 261,800 | 9,660,420 | |||||||
Jo-Ann Stores, Inc. (a) | 124,100 | 7,473,302 | |||||||
Monro Muffler Brake, Inc. | 198,434 | 6,863,815 | |||||||
Tractor Supply Company | 181,426 | 8,797,347 | |||||||
Ulta Salon, Cosmetics & Fragrance, Inc. (a) | 197,950 | 6,730,300 | |||||||
56,229,482 | |||||||||
Textiles, Apparel & Luxury Goods - 2.2% | |||||||||
Crocs, Inc. (a) | 563,300 | 9,643,696 | |||||||
The Warnaco Group, Inc. (a) | 121,600 | 6,696,512 | |||||||
16,340,208 | |||||||||
TOTAL COMMON STOCKS | |||||||||
(Cost $514,101,470) | 715,602,806 | ||||||||
SHORT-TERM INVESTMENTS - 2.5% | |||||||||
Money Market Funds (c) - 2.5% | |||||||||
Federated Government Obligations | |||||||||
Fund - Institutional Shares, 0.02% | 18,476,482 | 18,476,482 | |||||||
TOTAL SHORT-TERM INVESTMENTS | |||||||||
(Cost $18,476,482) | 18,476,482 | ||||||||
Total Investments - 99.9% | |||||||||
(Cost $532,577,952) | 734,079,288 | ||||||||
Other Assets in Excess of Liabilities - 0.1% | 555,352 | ||||||||
TOTAL NET ASSETS - 100.0% | $ | 734,634,640 |
(a)Non-income producing security.
(b)U.S. Dollar-denominated foreign security.
(c)The rate quoted is the annualized seven-day yield of the fund at period end.
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
18
LKCM Equity Fund |
Schedule of Investments |
December 31, 2010
COMMON STOCKS - 91.8% | Shares | Value | |||||||
Aerospace & Defense - 3.8% | |||||||||
Honeywell International Inc. | 16,000 | $ | 850,560 | ||||||
Raytheon Company | 15,000 | 695,100 | |||||||
Rockwell Collins, Inc. | 20,000 | 1,165,200 | |||||||
2,710,860 | |||||||||
Beverages - 2.6% | |||||||||
The Coca-Cola Company | 14,000 | 920,780 | |||||||
PepsiCo, Inc. | 15,000 | 979,950 | |||||||
1,900,730 | |||||||||
Biotechnology - 0.8% | |||||||||
Celgene Corporation (a) | 10,000 | 591,400 | |||||||
Capital Markets - 1.1% | |||||||||
Northern Trust Corporation | 14,000 | 775,740 | |||||||
Chemicals - 6.4% | |||||||||
Air Products and Chemicals, Inc. | 9,000 | 818,550 | |||||||
Calgon Carbon Corporation (a) | 22,000 | 332,640 | |||||||
E. I. du Pont de Nemours and Company | 25,000 | 1,247,000 | |||||||
FMC Corporation | 17,000 | 1,358,130 | |||||||
Monsanto Company | 12,000 | 835,680 | |||||||
4,592,000 | |||||||||
Commercial Banks - 8.4% | |||||||||
Bank of America Corporation | 48,000 | 640,320 | |||||||
Cullen/Frost Bankers, Inc. | 26,000 | 1,589,120 | |||||||
Glacier Bancorp, Inc. | 38,000 | 574,180 | |||||||
Hancock Holding Company | 25,000 | 871,500 | |||||||
Prosperity Bancshares, Inc. | 20,000 | 785,600 | |||||||
Texas Capital Bancshares, Inc. (a) | 18,000 | 382,860 | |||||||
Wells Fargo & Company | 40,000 | 1,239,600 | |||||||
6,083,180 | |||||||||
Commercial Services & Supplies - 2.1% | |||||||||
Republic Services, Inc. | 24,100 | 719,626 | |||||||
Waste Management, Inc. | 22,000 | 811,140 | |||||||
1,530,766 | |||||||||
Communications Equipment - 1.4% | |||||||||
Cisco Systems, Inc. (a) | 34,000 | 687,820 | |||||||
Research In Motion Limited (a) (b) | 6,000 | 348,780 | |||||||
1,036,600 | |||||||||
Computers & Peripherals - 4.7% | |||||||||
Apple Inc. (a) | 3,300 | 1,064,448 | |||||||
EMC Corporation (a) | 50,000 | 1,145,000 | |||||||
International Business Machines Corporation | 8,000 | 1,174,080 | |||||||
3,383,528 | |||||||||
Construction & Engineering - 1.0% | |||||||||
Foster Wheeler AG (a) (b) | 20,000 | 690,400 | |||||||
Construction Materials - 1.2% | |||||||||
Martin Marietta Materials, Inc. | 9,000 | 830,160 | |||||||
Containers & Packaging - 0.9% | |||||||||
Ball Corporation | 10,000 | 680,500 | |||||||
Diversified Financial Services - 0.5% | |||||||||
JPMorgan Chase & Co. | 8,100 | 343,602 | |||||||
Diversified Telecommunication | |||||||||
Services - 0.8% | |||||||||
AT&T Inc. | 20,000 | 587,600 | |||||||
Electrical Equipment - 3.0% | |||||||||
Emerson Electric Co. | 20,000 | 1,143,400 | |||||||
Roper Industries, Inc. | 12,990 | 992,826 | |||||||
2,136,226 | |||||||||
Electronic Equipment & Instruments - 2.5% | |||||||||
National Instruments Corporation | 25,000 | 941,000 | |||||||
Trimble Navigation Limited (a) | 21,000 | 838,530 | |||||||
1,779,530 | |||||||||
Energy Equipment & Services - 0.7% | |||||||||
National Oilwell Varco Inc. | 8,000 | 538,000 | |||||||
Food & Staples Retailing - 1.6% | |||||||||
CVS Caremark Corporation | 10,000 | 347,700 | |||||||
Walgreen Company | 20,000 | 779,200 | |||||||
1,126,900 | |||||||||
Health Care Equipment & Supplies - 3.5% | |||||||||
Covidien plc (b) | 19,000 | 867,540 | |||||||
DENTSPLY International Inc. | 17,000 | 580,890 | |||||||
Thermo Fisher Scientific, Inc. (a) | 20,000 | 1,107,200 | |||||||
2,555,630 | |||||||||
Health Care Providers & Services - 0.8% | |||||||||
Express Scripts, Inc. (a) | 11,000 | 594,550 | |||||||
Hotels, Restaurants & Leisure - 0.7% | |||||||||
Carnival Corporation (b) | 11,300 | 521,043 | |||||||
Household Products - 3.6% | |||||||||
Energizer Holdings, Inc. (a) | 5,800 | 422,820 | |||||||
Kimberly-Clark Corporation | 12,000 | 756,480 | |||||||
The Procter & Gamble Company | 22,000 | 1,415,260 | |||||||
2,594,560 | |||||||||
Internet Software & Services - 2.7% | |||||||||
Amazon.com, Inc. (a) | 4,000 | 720,000 | |||||||
Expedia, Inc. | 20,000 | 501,800 | |||||||
Google Inc. - Class A (a) | 1,200 | 712,764 | |||||||
1,934,564 | |||||||||
Leisure Equipment & Products - 1.4% | |||||||||
Brunswick Corporation | 55,000 | 1,030,700 | |||||||
Life Sciences Tools & Services - 1.1% | |||||||||
PerkinElmer, Inc. | 31,000 | 800,420 | |||||||
Machinery - 1.8% | |||||||||
Danaher Corporation | 28,000 | 1,320,760 | |||||||
Marine - 1.3% | |||||||||
Kirby Corporation (a) | 22,000 | 969,100 |
The accompanying notes are an integral part of these financial statements.
19
LKCM Equity Fund |
Schedule of Investments, Continued |
December 31, 2010
COMMON STOCKS | Shares | Value | |||||||
Media - 2.1% | |||||||||
Cinemark Holdings, Inc. | 25,000 | $ | 431,000 | ||||||
National CineMedia, Inc. | 20,000 | 398,200 | |||||||
Time Warner Inc. | 22,000 | 707,740 | |||||||
1,536,940 | |||||||||
Metals & Mining - 2.3% | |||||||||
Newmont Mining Corporation | 13,000 | 798,590 | |||||||
Peabody Energy Corporation | 13,100 | 838,138 | |||||||
1,636,728 | |||||||||
Oil & Gas Exploration & Production | |||||||||
Companies - 9.8% | |||||||||
ConocoPhillips | 15,000 | 1,021,500 | |||||||
EOG Resources, Inc. | 9,000 | 822,690 | |||||||
Exxon Mobil Corporation | 24,000 | 1,754,880 | |||||||
Noble Energy, Inc. | 10,000 | 860,800 | |||||||
Occidental Petroleum Corporation | 9,000 | 882,900 | |||||||
Range Resources Corporation | 18,000 | 809,640 | |||||||
SM Energy Company | 8,000 | 471,440 | |||||||
The Williams Companies, Inc. | 20,000 | 494,400 | |||||||
7,118,250 | |||||||||
Pharmaceuticals - 2.4% | |||||||||
Abbott Laboratories | 17,000 | 814,470 | |||||||
Pfizer Inc. | 52,000 | 910,520 | |||||||
1,724,990 | |||||||||
Professional Services - 0.6% | |||||||||
Robert Half International, Inc. | 15,000 | 459,000 | |||||||
Real Estate - 0.6% | |||||||||
CB Richard Ellis Group, Inc. - Class A (a) | 21,000 | 430,080 | |||||||
Road & Rail - 1.6% | |||||||||
Kansas City Southern (a) | 8,500 | 406,810 | |||||||
Union Pacific Corporation | 8,000 | 741,280 | |||||||
1,148,090 | |||||||||
Semiconductor & Semiconductor | |||||||||
Equipment - 0.8% | |||||||||
Texas Instruments, Incorporated | 18,000 | 585,000 | |||||||
Software - 4.4% | |||||||||
Adobe Systems Incorporated (a) | 22,000 | 677,160 | |||||||
Microsoft Corporation | 19,000 | 530,480 | |||||||
Nuance Communications, Inc. (a) | 38,780 | 705,020 | |||||||
Oracle Corporation | 40,000 | 1,252,000 | |||||||
3,164,660 | |||||||||
Specialty Retail - 6.0% | |||||||||
O’Reilly Automotive, Inc. (a) | 10,000 | 604,200 | |||||||
PetSmart, Inc. | 30,000 | 1,194,600 | |||||||
Tiffany & Co. | 18,000 | 1,120,860 | |||||||
Tractor Supply Company | 30,000 | 1,454,700 | |||||||
4,374,360 | |||||||||
Textiles, Apparel & Luxury Goods - 0.8% | |||||||||
VF Corporation | 7,000 | 603,260 | |||||||
TOTAL COMMON STOCKS | |||||||||
(Cost $50,561,397) | 66,420,407 | ||||||||
SHORT-TERM INVESTMENTS - 8.1% | |||||||||
Money Market Funds (c) - 8.1% | |||||||||
The AIM STIT - Treasury | |||||||||
Portfolio - Institutional Shares, 0.04% | 1,708,686 | 1,708,686 | |||||||
Dreyfus Government Cash Management | |||||||||
Fund - Institutional Shares, 0.01% | 2,057,378 | 2,057,378 | |||||||
Federated Government Obligations | |||||||||
Fund - Institutional Shares, 0.02% | 2,079,617 | 2,079,617 | |||||||
TOTAL SHORT-TERM INVESTMENTS | |||||||||
(Cost $5,845,681) | 5,845,681 | ||||||||
Total Investments - 99.9% | |||||||||
(Cost $56,407,078) | 72,266,088 | ||||||||
Other Assets in Excess of Liabilities - 0.1% | 103,562 | ||||||||
TOTAL NET ASSETS - 100.0% | $ | 72,369,650 |
(a)Non-income producing security.
(b)U.S. Dollar-denominated foreign security.
(c)The rate quoted is the annualized seven-day yield of the fund at period end.
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
20
LKCM Balanced Fund |
Schedule of Investments |
December 31, 2010
COMMON STOCKS - 71.4% | Shares | Value | |||||||
Aerospace & Defense - 2.6% | |||||||||
General Dynamics Corporation | 1,700 | $ | 120,632 | ||||||
Raytheon Company | 3,132 | 145,137 | |||||||
Rockwell Collins, Inc. | 2,800 | 163,128 | |||||||
428,897 | |||||||||
Air Freight & Logistics - 1.1% | |||||||||
United Parcel Service, Inc. - Class B | 2,400 | 174,192 | |||||||
Asset Management - 0.8% | |||||||||
Bank of New York Mellon Corporation | 4,470 | 134,994 | |||||||
Beverages - 2.1% | |||||||||
The Coca-Cola Company | 2,900 | 190,733 | |||||||
PepsiCo, Inc. | 2,400 | 156,792 | |||||||
347,525 | |||||||||
Biotechnology - 2.8% | |||||||||
Celgene Corporation (a) | 3,000 | 177,420 | |||||||
Charles River Laboratories | |||||||||
International, Inc. (a) | 4,600 | 163,484 | |||||||
Gilead Sciences, Inc. (a) | 3,400 | 123,216 | |||||||
464,120 | |||||||||
Capital Markets - 1.2% | |||||||||
Lazard Ltd. - Class A (b) | 4,800 | 189,552 | |||||||
Chemicals - 3.5% | |||||||||
Air Products and Chemicals, Inc. | 1,300 | 118,235 | |||||||
E. I. du Pont de Nemours and Company | 2,300 | 114,724 | |||||||
FMC Corporation | 2,400 | 191,736 | |||||||
Monsanto Company | 2,100 | 146,244 | |||||||
570,939 | |||||||||
Commercial Banks - 3.4% | |||||||||
Bank of America Corporation | 12,800 | 170,752 | |||||||
Cullen/Frost Bankers, Inc. | 2,800 | 171,136 | |||||||
Wells Fargo & Company | 7,000 | 216,930 | |||||||
558,818 | |||||||||
Commercial Services & Supplies - 1.1% | |||||||||
Waste Management, Inc. | 4,700 | 173,289 | |||||||
Communications Equipment - 1.4% | |||||||||
Cisco Systems, Inc. (a) | 5,700 | 115,311 | |||||||
Harris Corporation | 2,600 | 117,780 | |||||||
233,091 | |||||||||
Computers & Peripherals - 4.3% | |||||||||
Apple Inc. (a) | 900 | 290,304 | |||||||
EMC Corporation (a) | 8,600 | 196,940 | |||||||
International Business Machines Corporation | 1,500 | 220,140 | |||||||
707,384 | |||||||||
Containers & Packaging - 0.8% | |||||||||
Ball Corporation | 2,000 | 136,100 | |||||||
Diversified Financial Services - 1.3% | |||||||||
JPMorgan Chase & Co. | 4,900 | 207,858 | |||||||
Diversified Telecommunication Services - 1.1% | |||||||||
AT&T Inc. | 6,000 | 176,280 | |||||||
Electrical Equipment - 1.1% | |||||||||
Emerson Electric Co. | 3,300 | 188,661 | |||||||
Electronic Equipment & Instruments - 1.1% | |||||||||
National Instruments Corporation | 5,000 | 188,200 | |||||||
Energy Equipment & Services - 1.3% | |||||||||
Schlumberger Limited (b) | 2,500 | 208,750 | |||||||
Food & Staples Retailing - 3.9% | |||||||||
CVS Caremark Corporation | 4,600 | 159,942 | |||||||
The Kroger Co. | 7,400 | 165,464 | |||||||
Walgreen Company | 4,300 | 167,528 | |||||||
Wal-Mart Stores, Inc. | 2,900 | 156,397 | |||||||
649,331 | |||||||||
Health Care Equipment & Supplies - 2.1% | |||||||||
Alcon, Inc. (b) | 1,100 | 179,740 | |||||||
Thermo Fisher Scientific, Inc. (a) | 3,100 | 171,616 | |||||||
351,356 | |||||||||
Health Care Providers & Services - 1.1% | |||||||||
Express Scripts, Inc. (a) | 3,300 | 178,365 | |||||||
Household Products - 2.6% | |||||||||
Colgate-Palmolive Company | 2,000 | 160,740 | |||||||
Kimberly-Clark Corporation | 1,700 | 107,168 | |||||||
The Procter & Gamble Company | 2,600 | 167,258 | |||||||
435,166 | |||||||||
Industrial Conglomerates - 1.2% | |||||||||
General Electric Company | 10,480 | 191,679 | |||||||
Internet Software & Services - 2.2% | |||||||||
Expedia, Inc. | 7,200 | 180,648 | |||||||
Google Inc. - Class A (a) | 300 | 178,191 | |||||||
358,839 | |||||||||
Investment Bank & Brokerage - 0.9% | |||||||||
The Goldman Sachs Group, Inc. | 900 | 151,344 | |||||||
IT Services - 1.8% | |||||||||
Accenture plc - Class A (b) | 3,400 | 164,866 | |||||||
Automatic Data Processing, Inc. | 3,000 | 138,840 | |||||||
303,706 | |||||||||
Life Sciences Tools & Services - 1.0% | |||||||||
PerkinElmer, Inc. | 6,700 | 172,994 | |||||||
Machinery - 1.3% | |||||||||
Danaher Corporation | 4,400 | 207,548 | |||||||
Media - 3.7% | |||||||||
CBS Corporation - Class B | 10,300 | 196,215 | |||||||
DIRECTTV - Class A (a) | 3,300 | 131,769 | |||||||
Time Warner Inc. | 4,000 | 128,680 | |||||||
The Walt Disney Company | 4,000 | 150,040 | |||||||
606,704 |
The accompanying notes are an integral part of these financial statements.
21
LKCM Balanced Fund |
Schedule of Investments, Continued |
December 31, 2010
COMMON STOCKS | Shares | Value | |||||||
Multiline Retail - 0.9% | |||||||||
Kohl’s Corporation (a) | 2,800 | $ | 152,152 | ||||||
Oil & Gas Exploration & Production | |||||||||
Companies - 7.1% | |||||||||
Cabot Oil & Gas Corporation | 4,400 | 166,540 | |||||||
Chevron Corporation | 1,795 | 163,794 | |||||||
Denbury Resources Inc. (a) | 7,000 | 133,630 | |||||||
Devon Energy Corporation | 1,700 | 133,467 | |||||||
EOG Resources, Inc. | 1,400 | 127,974 | |||||||
Exxon Mobil Corporation | 3,932 | 287,508 | |||||||
SM Energy Company | 2,800 | 165,004 | |||||||
1,177,917 | |||||||||
Pharmaceuticals - 2.0% | |||||||||
Abbott Laboratories | 3,500 | 167,685 | |||||||
Teva Pharmaceutical | |||||||||
Industries Ltd. - ADR (b) | 3,000 | 156,390 | |||||||
324,075 | |||||||||
Professional Services - 0.8% | |||||||||
Robert Half International, Inc. | 4,200 | 128,520 | |||||||
Software - 3.3% | |||||||||
Adobe Systems Incorporated (a) | 5,900 | 181,602 | |||||||
Nuance Communications, Inc. (a) | 10,400 | 189,072 | |||||||
Oracle Corporation | 5,500 | 172,150 | |||||||
542,824 | |||||||||
Specialty Retail - 3.6% | |||||||||
The Home Depot, Inc. | 4,600 | 161,276 | |||||||
O’Reilly Automotive, Inc. (a) | 2,800 | 169,176 | |||||||
PetSmart, Inc. | 4,300 | 171,226 | |||||||
RadioShack Corporation | 5,000 | 92,450 | |||||||
594,128 | |||||||||
Textiles, Apparel & Luxury Goods - 0.9% | |||||||||
VF Corporation | 1,800 | 155,124 | |||||||
TOTAL COMMON STOCKS | |||||||||
(Cost $8,710,847) | 11,770,422 | ||||||||
Principal | |||||||||
CORPORATE BONDS - 26.2% | Amount | ||||||||
Air Freight & Logistics - 0.3% | |||||||||
United Parcel Service, Inc. | |||||||||
3.875%, 04/01/2014 | $ | 50,000 | 53,311 | ||||||
Beverages - 2.3% | |||||||||
Anheuser-Busch Inbev Worldwide Inc. | |||||||||
3.00%, 10/15/2012 | 150,000 | 154,839 | |||||||
The Coca-Cola Company | |||||||||
5.35%, 11/15/2017 | 100,000 | 113,307 | |||||||
PepsiCo, Inc. | |||||||||
4.65%, 02/15/2013 | 100,000 | 107,735 | |||||||
375,881 | |||||||||
Biotechnology - 0.6% | |||||||||
Celgene Corporation | |||||||||
2.45%, 10/15/2015 | 100,000 | 97,241 | |||||||
Chemicals - 1.9% | |||||||||
Airgas, Inc. | |||||||||
2.85%, 10/01/2013 | 75,000 | 75,637 | |||||||
E. I. du Pont de Nemours and Company | |||||||||
3.25%, 01/15/2015 | 75,000 | 77,915 | |||||||
Praxair, Inc.: | |||||||||
1.75%, 11/15/2012 | 60,000 | 60,812 | |||||||
2.125%, 06/14/2013 | 100,000 | 102,211 | |||||||
316,575 | |||||||||
Commercial Banks - 0.5% | |||||||||
Wells Fargo & Company | |||||||||
5.25%, 10/23/2012 | 75,000 | 80,441 | |||||||
Computers & Peripherals - 2.2% | |||||||||
Dell Inc. | |||||||||
3.375%, 06/15/2012 | 100,000 | 103,512 | |||||||
Hewlett-Packard Company | |||||||||
4.50%, 03/01/2013 | 100,000 | 107,091 | |||||||
International Business Machines Corporation | |||||||||
2.10%, 05/06/2013 | 150,000 | 153,729 | |||||||
364,332 | |||||||||
Containers & Packaging - 0.5% | |||||||||
Ball Corporation | |||||||||
7.125%, 09/01/2016 | |||||||||
Callable 09/01/2013 | 75,000 | 81,187 | |||||||
Diversified Telecommunication | |||||||||
Services - 1.3% | |||||||||
AT&T Inc.: | |||||||||
5.875%, 02/01/2012 | 75,000 | 78,978 | |||||||
5.10%, 09/15/2014 | 125,000 | 136,878 | |||||||
215,856 | |||||||||
Electric Utilities - 0.9% | |||||||||
Georgia Power Company | |||||||||
1.30%, 09/15/2013 | 50,000 | 50,105 | |||||||
Southern Company | |||||||||
5.30%, 01/15/2012 | 100,000 | 104,604 | |||||||
154,709 | |||||||||
Electrical Equipment - 0.5% | |||||||||
Emerson Electric Co. | |||||||||
4.50%, 05/01/2013 | 75,000 | 80,778 | |||||||
Energy Equipment & Services - 0.6% | |||||||||
BJ Services Company | |||||||||
5.75%, 06/01/2011 | 100,000 | 102,149 | |||||||
The accompanying notes are an integral part of these financial statements.
22
LKCM Balanced Fund |
Schedule of Investments, Continued |
December 31, 2010
Principal | |||||||||
CORPORATE BONDS | Amount | Value | |||||||
Food & Staples Retailing - 2.0% | |||||||||
Costco Wholesale Corporation | |||||||||
5.30%, 03/15/2012 | $ | 100,000 | $ | 105,235 | |||||
CVS Caremark Corporation | |||||||||
5.75%, 06/01/2017 | 100,000 | 111,416 | |||||||
Wal-Mart Stores, Inc. | |||||||||
4.55%, 05/01/2013 | 100,000 | 108,074 | |||||||
324,725 | |||||||||
Food Products - 0.3% | |||||||||
McCormick & Company, Incorporated | |||||||||
5.25%, 09/01/2013 | 50,000 | 55,139 | |||||||
Health Care Equipment & Supplies - 1.0% | |||||||||
Covidien International Finance S.A. (b) | |||||||||
1.875%, 06/15/2013 | 100,000 | 101,258 | |||||||
Thermo Fisher Scientific, Inc. | |||||||||
2.15%, 12/28/2012 | 70,000 | 71,238 | |||||||
172,496 | |||||||||
Industrial Conglomerates - 0.6% | |||||||||
General Electric Company | |||||||||
5.00%, 02/01/2013 | 100,000 | 106,950 | |||||||
Insurance - 1.5% | |||||||||
Berkshire Hathaway Inc. | |||||||||
4.85%, 01/15/2015 | 100,000 | 109,460 | |||||||
Prudential Financial, Inc. | |||||||||
3.625%, 09/17/2012 | 125,000 | 129,781 | |||||||
239,241 | |||||||||
Internet Software & Services - 0.8% | |||||||||
eBay Inc. | |||||||||
0.875%, 10/15/2013 | 125,000 | 123,836 | |||||||
Investment Bank & Brokerage - 0.9% | |||||||||
The Goldman Sachs Group, Inc.: | |||||||||
5.25%, 04/01/2013 | 100,000 | 107,411 | |||||||
5.50%, 11/15/2014 | 35,000 | 37,884 | |||||||
145,295 | |||||||||
Media - 0.6% | |||||||||
Time Warner Inc. | |||||||||
3.15%, 07/15/2015 | 100,000 | 101,708 | |||||||
Metals & Mining - 0.6% | |||||||||
Alcoa Inc. | |||||||||
5.375%, 01/15/2013 | 100,000 | 106,649 | |||||||
Multi-Utilities & Unregulated Power - 0.3% | |||||||||
Duke Energy Corp. | |||||||||
6.25%, 01/15/2012 | 50,000 | 52,798 | |||||||
Oil & Gas Exploration & Production | |||||||||
Companies - 4.9% | |||||||||
Apache Corporation | |||||||||
5.625%, 01/15/2017 | 75,000 | 85,650 | |||||||
Chevron Corporation | |||||||||
3.45%, 03/03/2012 | 100,000 | 103,216 | |||||||
ConocoPhillips | |||||||||
5.50%, 04/15/2013 | 100,000 | 109,711 | |||||||
Enterprise Products Operating LLC | |||||||||
4.60%, 08/01/2012 | 100,000 | 104,994 | |||||||
EOG Resources, Inc. | |||||||||
6.125%, 10/01/2013 | 100,000 | 111,733 | |||||||
Noble Energy, Inc. | |||||||||
5.25%, 04/15/2014 | 100,000 | 108,019 | |||||||
Occidental Petroleum Corporation | |||||||||
1.45%, 12/13/2013 | 75,000 | 75,382 | |||||||
Shell International Finance BV (b) | |||||||||
1.875%, 03/25/2013 | 100,000 | 101,563 | |||||||
800,268 | |||||||||
Pharmaceuticals - 1.1% | |||||||||
Abbott Laboratories | |||||||||
5.15%, 11/30/2012 | 50,000 | 54,084 | |||||||
Teva Pharmaceutical Industries Ltd. (b) | |||||||||
3.00%, 06/15/2015 | 125,000 | 127,317 | |||||||
181,401 | |||||||||
TOTAL CORPORATE BONDS | |||||||||
(Cost $4,174,887) | 4,332,966 | ||||||||
SHORT-TERM INVESTMENTS - 2.1% | |||||||||
Corporate Bonds - 0.5% | |||||||||
Allied Waste North America Inc. | |||||||||
5.75%, 02/15/2011 | 75,000 | 75,351 | |||||||
Shares | |||||||||
Money Market Funds (c) - 1.6% | |||||||||
Federated Government Obligations | |||||||||
Fund - Institutional Shares, 0.02% | 264,736 | 264,736 | |||||||
TOTAL SHORT-TERM INVESTMENTS | |||||||||
(Cost $340,125) | 340,087 | ||||||||
Total Investments - 99.7% | |||||||||
(Cost $13,225,859) | 16,443,475 | ||||||||
Other Assets in Excess of Liabilities - 0.3% | 42,878 | ||||||||
TOTAL NET ASSETS - 100.0% | $ | 16,486,353 |
ADR American Depository Receipt.
(a)Non-income producing security.
(b)U.S. Dollar-denominated foreign security.
(c)The rate quoted is the annualized seven-day yield of the fund at period end.
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
23
LKCM Fixed Income Fund |
Schedule of Investments |
December 31, 2010
Principal | |||||||||
CORPORATE BONDS - 90.0% | Amount | Value | |||||||
Aerospace & Defense - 4.5% | |||||||||
General Dynamics Corporation: | |||||||||
4.25%, 05/15/2013 | $ | 250,000 | $ | 268,850 | |||||
5.25%, 02/01/2014 | 225,000 | 247,928 | |||||||
5.375%, 08/15/2015 | 1,375,000 | 1,550,816 | |||||||
Honeywell International Inc.: | |||||||||
4.25%, 03/01/2013 | 1,300,000 | 1,391,053 | |||||||
3.875%, 02/15/2014 | 270,000 | 286,936 | |||||||
Lockheed Martin Corporation | |||||||||
7.65%, 05/01/2016 | 1,250,000 | 1,523,091 | |||||||
Raytheon Company | |||||||||
1.625%, 10/15/2015 | 900,000 | 864,494 | |||||||
Rockwell Collins, Inc. | |||||||||
4.75%, 12/01/2013 | 430,000 | 463,969 | |||||||
United Technologies Corporation | |||||||||
6.10%, 05/15/2012 | 700,000 | 751,621 | |||||||
7,348,758 | |||||||||
Air Freight & Logistics - 0.4% | |||||||||
United Parcel Service, Inc. | |||||||||
3.875%, 04/01/2014 | 625,000 | 666,393 | |||||||
Asset Management - 0.6% | |||||||||
Mellon Funding Corporation | |||||||||
6.40%, 05/14/2011 | 892,000 | 910,517 | |||||||
Beverages - 3.4% | |||||||||
Anheuser-Busch Inbev Worldwide Inc. | |||||||||
3.00%, 10/15/2012 | 2,000,000 | 2,064,518 | |||||||
The Coca-Cola Company: | |||||||||
3.625%, 03/15/2014 | 400,000 | 423,678 | |||||||
5.35%, 11/15/2017 | 1,500,000 | 1,699,598 | |||||||
PepsiCo, Inc.: | |||||||||
4.65%, 02/15/2013 | 1,035,000 | 1,115,060 | |||||||
7.90%, 11/01/2018 | 214,000 | 275,757 | |||||||
5,578,611 | |||||||||
Biotechnology - 0.6% | |||||||||
Celgene Corporation | |||||||||
2.45%, 10/15/2015 | 1,000,000 | 972,412 | |||||||
Building Products - 1.9% | |||||||||
Masco Corporation: | |||||||||
5.875%, 07/15/2012 | 1,645,000 | 1,725,092 | |||||||
7.125%, 03/15/2020 | 1,350,000 | 1,414,655 | |||||||
3,139,747 | |||||||||
Chemicals - 3.9% | |||||||||
Airgas, Inc. | |||||||||
2.85%, 10/01/2013 | 1,160,000 | 1,169,854 | |||||||
E. I. du Pont de Nemours and Company | |||||||||
3.25%, 01/15/2015 | 1,775,000 | 1,843,975 | |||||||
The Lubrizol Corporation | |||||||||
5.50%, 10/01/2014 | 1,579,000 | 1,729,673 | |||||||
Praxair, Inc.: | |||||||||
6.375%, 04/01/2012 | 925,000 | 986,985 | |||||||
1.75%, 11/15/2012 | 372,000 | 377,034 | |||||||
5.25%, 11/15/2014 | 200,000 | 223,196 | |||||||
6,330,717 | |||||||||
Commercial Banks - 1.7% | |||||||||
Bank of America Corporation: | |||||||||
7.375%, 05/15/2014 | 1,000,000 | 1,112,414 | |||||||
5.375%, 06/15/2014 | 1,025,000 | 1,078,351 | |||||||
Frost National Bank | |||||||||
6.875%, 08/01/2011 | 500,000 | 511,863 | |||||||
2,702,628 | |||||||||
Commercial Services & Supplies - 1.3% | |||||||||
Pitney Bowes Inc.: | |||||||||
4.625%, 10/01/2012 | 500,000 | 524,853 | |||||||
3.875%, 06/15/2013 | 400,000 | 415,434 | |||||||
Republic Services, Inc. | |||||||||
5.50%, 09/15/2019 | 1,000,000 | 1,092,437 | |||||||
2,032,724 | |||||||||
Communications Equipment - 2.7% | |||||||||
Cisco Systems, Inc.: | |||||||||
2.90%, 11/17/2014 | 340,000 | 352,998 | |||||||
5.50%, 02/22/2016 | 1,000,000 | 1,142,406 | |||||||
4.95%, 02/15/2019 | 700,000 | 764,117 | |||||||
Harris Corporation: | |||||||||
5.00%, 10/01/2015 | 1,088,000 | 1,151,537 | |||||||
6.375%, 06/15/2019 | 900,000 | 1,022,481 | |||||||
4,433,539 | |||||||||
Computers & Peripherals - 4.9% | |||||||||
Dell Inc.: | |||||||||
3.375%, 06/15/2012 | 1,175,000 | 1,216,262 | |||||||
5.625%, 04/15/2014 | 750,000 | 828,837 | |||||||
Hewlett-Packard Company: | |||||||||
4.25%, 02/24/2012 | 200,000 | 207,897 | |||||||
6.50%, 07/01/2012 | 700,000 | 758,008 | |||||||
4.50%, 03/01/2013 | 1,295,000 | 1,386,834 | |||||||
International Business | |||||||||
Machines Corporation: | |||||||||
2.10%, 05/06/2013 | 1,750,000 | 1,793,505 | |||||||
5.70%, 09/14/2017 | 1,500,000 | 1,724,063 | |||||||
7,915,406 | |||||||||
Consumer Finance - 0.8% | |||||||||
Western Union Company: | |||||||||
5.40%, 11/17/2011 | 150,000 | 155,970 | |||||||
5.93%, 10/01/2016 | 1,000,000 | 1,120,911 | |||||||
1,276,881 |
The accompanying notes are an integral part of these financial statements.
24
LKCM Fixed Income Fund |
Schedule of Investments, Continued |
December 31, 2010
Principal | |||||||||
CORPORATE BONDS | Amount | Value | |||||||
Containers & Packaging - 2.2% | |||||||||
Ball Corporation | |||||||||
7.125%, 09/01/2016 | |||||||||
Callable 09/01/2013 | $ | 1,825,000 | $ | 1,975,562 | |||||
Packaging Corp. of America | |||||||||
5.75%, 08/01/2013 | 1,500,000 | 1,609,557 | |||||||
3,585,119 | |||||||||
Diversified Telecommunication | |||||||||
Services - 4.4% | |||||||||
AT&T Inc.: | |||||||||
6.25%, 03/15/2011 | 200,000 | 202,243 | |||||||
5.10%, 09/15/2014 | 1,750,000 | 1,916,292 | |||||||
BellSouth Corporation | |||||||||
6.00%, 10/15/2011 | 1,000,000 | 1,042,681 | |||||||
Qwest Corporation | |||||||||
7.875%, 09/01/2011 | 1,550,000 | 1,600,375 | |||||||
Verizon Communications Inc.: | |||||||||
5.25%, 04/15/2013 | 275,000 | 299,166 | |||||||
5.55%, 02/15/2016 | 1,000,000 | 1,122,183 | |||||||
5.50%, 02/15/2018 | 875,000 | 963,001 | |||||||
7,145,941 | |||||||||
Electric Utilities - 0.7% | |||||||||
Southern Power Co. | |||||||||
4.875%, 07/15/2015 | 1,050,000 | 1,137,112 | |||||||
Electrical Equipment - 0.3% | |||||||||
Emerson Electric Co. | |||||||||
4.50%, 05/01/2013 | 425,000 | 457,744 | |||||||
Energy Equipment & Services - 2.8% | |||||||||
Baker Hughes Incorporated | |||||||||
6.50%, 11/15/2013 | 725,000 | 825,656 | |||||||
BJ Services Company | |||||||||
5.75%, 06/01/2011 | 2,000,000 | 2,042,972 | |||||||
Weatherford International, Inc. | |||||||||
6.35%, 06/15/2017 | 1,550,000 | 1,722,399 | |||||||
4,591,027 | |||||||||
Food & Staples Retailing - 6.6% | |||||||||
Costco Wholesale Corporation | |||||||||
5.30%, 03/15/2012 | 700,000 | 736,644 | |||||||
CVS Caremark Corporation: | |||||||||
5.75%, 08/15/2011 | 675,000 | 696,039 | |||||||
4.875%, 09/15/2014 | 330,000 | 358,632 | |||||||
3.25%, 05/18/2015 | 1,000,000 | 1,017,322 | |||||||
5.75%, 06/01/2017 | 2,750,000 | 3,063,923 | |||||||
Sysco Corporation | |||||||||
4.20%, 02/12/2013 | 1,175,000 | 1,250,827 | |||||||
Walgreen Company | |||||||||
4.875%, 08/01/2013 | 1,955,000 | 2,136,635 | |||||||
Wal-Mart Stores, Inc. | |||||||||
4.55%, 05/01/2013 | 1,400,000 | 1,513,042 | |||||||
10,773,064 | |||||||||
Food Products - 1.7% | |||||||||
The Hershey Company | |||||||||
4.85%, 08/15/2015 | 1,000,000 | 1,092,323 | |||||||
McCormick & Company, Incorporated | |||||||||
5.25%, 09/01/2013 | 1,450,000 | 1,599,027 | |||||||
2,691,350 | |||||||||
Health Care Equipment & Supplies - 3.3% | |||||||||
Covidien International Finance S.A. (a) | |||||||||
1.875%, 06/15/2013 | 1,550,000 | 1,569,498 | |||||||
Medtronic, Inc. | |||||||||
4.50%, 03/15/2014 | 900,000 | 977,641 | |||||||
Thermo Fisher Scientific, Inc.: | |||||||||
2.15%, 12/28/2012 | 1,900,000 | 1,933,609 | |||||||
3.25%, 11/20/2014 | 900,000 | 926,244 | |||||||
5,406,992 | |||||||||
Health Care Providers & Services - 1.3% | |||||||||
Express Scripts, Inc.: | |||||||||
5.25%, 06/15/2012 | 1,000,000 | 1,055,824 | |||||||
6.25%, 06/15/2014 | 1,000,000 | 1,118,837 | |||||||
2,174,661 | |||||||||
Hotels, Restaurants & Leisure - 1.3% | |||||||||
McDonald’s Corporation: | |||||||||
6.00%, 04/15/2011 | 1,000,000 | 1,015,856 | |||||||
5.35%, 03/01/2018 | 1,000,000 | 1,123,698 | |||||||
2,139,554 | |||||||||
Household Durables - 2.8% | |||||||||
Jarden Corporation: | |||||||||
8.00%, 05/01/2016 | |||||||||
Callable 05/01/2013 | 1,000,000 | 1,093,750 | |||||||
7.50%, 05/01/2017 | 1,900,000 | 2,011,625 | |||||||
7.50%, 01/15/2020 | |||||||||
Callable 01/15/2015 | 1,340,000 | 1,403,650 | |||||||
4,509,025 | |||||||||
Household Products - 1.3% | |||||||||
Kimberly-Clark Corporation | |||||||||
5.625%, 02/15/2012 | 1,000,000 | 1,052,985 | |||||||
The Procter & Gamble Company | |||||||||
8.00%, 09/01/2024 | |||||||||
Putable 09/01/2014 | 775,000 | 1,030,785 | |||||||
2,083,770 | |||||||||
Industrial Conglomerates - 2.1% | |||||||||
3M Co. | |||||||||
4.375%, 08/15/2013 | 1,500,000 | 1,632,899 | |||||||
General Electric Company | |||||||||
5.00%, 02/01/2013 | 1,600,000 | 1,711,203 | |||||||
3,344,102 |
The accompanying notes are an integral part of these financial statements.
25
LKCM Fixed Income Fund |
Schedule of Investments, Continued |
December 31, 2010
Principal | |||||||||
CORPORATE BONDS | Amount | Value | |||||||
Insurance - 2.2% | |||||||||
Berkshire Hathaway Inc. | |||||||||
4.85%, 01/15/2015 | $ | 1,225,000 | $ | 1,340,889 | |||||
Prudential Financial, Inc.: | |||||||||
3.625%, 09/17/2012 | 1,375,000 | 1,427,585 | |||||||
2.75%, 01/14/2013 | 750,000 | 764,065 | |||||||
3,532,539 | |||||||||
Internet Software & Services - 0.6% | |||||||||
eBay Inc. | |||||||||
0.875%, 10/15/2013 | 1,000,000 | 990,685 | |||||||
Investment Bank & Brokerage - 1.9% | |||||||||
The Goldman Sachs Group, Inc.: | |||||||||
3.625%, 08/01/2012 | 1,000,000 | 1,032,399 | |||||||
5.125%, 01/15/2015 | 1,000,000 | 1,075,364 | |||||||
Morgan Stanley | |||||||||
5.00%, 08/31/2025 | |||||||||
Callable 08/31/2011 | 1,000,000 | 993,923 | |||||||
3,101,686 | |||||||||
Media - 2.1% | |||||||||
Time Warner Inc. | |||||||||
3.15%, 07/15/2015 | 1,350,000 | 1,373,065 | |||||||
The Walt Disney Company: | |||||||||
4.70%, 12/01/2012 | 225,000 | 241,302 | |||||||
5.625%, 09/15/2016 | 1,500,000 | 1,729,870 | |||||||
3,344,237 | |||||||||
Metals & Mining - 2.5% | |||||||||
Alcoa Inc.: | |||||||||
6.00%, 01/15/2012 | 1,310,000 | 1,366,783 | |||||||
5.375%, 01/15/2013 | 590,000 | 629,227 | |||||||
5.55%, 02/01/2017 | 500,000 | 519,965 | |||||||
Peabody Energy Corporation: | |||||||||
5.875%, 04/15/2016 | |||||||||
Callable 04/15/2011 | 1,000,000 | 1,010,000 | |||||||
6.50%, 09/15/2020 | 500,000 | 536,250 | |||||||
4,062,225 | |||||||||
Multiline Retail - 0.2% | |||||||||
Kohl’s Corporation | |||||||||
6.25%, 12/15/2017 | 282,000 | 325,825 | |||||||
Multi-Utilities & Unregulated Power - 0.7% | |||||||||
Duke Energy Corp. | |||||||||
6.25%, 01/15/2012 | 1,000,000 | 1,055,958 | |||||||
Oil & Gas Exploration & Production | |||||||||
Companies - 12.2% | |||||||||
Anadarko Petroleum Corporation: | |||||||||
5.95%, 09/15/2016 | 2,000,000 | 2,151,180 | |||||||
6.375%, 09/15/2017 | 2,000,000 | 2,181,600 | |||||||
Apache Corporation | |||||||||
6.25%, 04/15/2012 | 1,593,000 | 1,696,327 | |||||||
ConocoPhillips | |||||||||
4.75%, 10/15/2012 | 875,000 | 937,428 | |||||||
Denbury Resources Inc. | |||||||||
7.50%, 04/01/2013 | |||||||||
Callable 04/01/2011 | 1,000,000 | 1,015,000 | |||||||
Devon Financing Corp. ULC (a) | |||||||||
6.875%, 09/30/2011 | 1,798,000 | 1,878,727 | |||||||
Enterprise Products Operating LLC | |||||||||
4.60%, 08/01/2012 | 1,000,000 | 1,049,937 | |||||||
EOG Resources, Inc.: | |||||||||
6.125%, 10/01/2013 | 1,500,000 | 1,675,989 | |||||||
2.95%, 06/01/2015 | 1,200,000 | 1,209,577 | |||||||
Marathon Oil Corporation | |||||||||
5.90%, 03/15/2018 | 1,000,000 | 1,135,508 | |||||||
Noble Energy, Inc. | |||||||||
5.25%, 04/15/2014 | 1,500,000 | 1,620,289 | |||||||
Occidental Petroleum Corporation | |||||||||
1.45%, 12/13/2013 | 2,000,000 | 2,010,186 | |||||||
Range Resources Corporation | |||||||||
8.00%, 05/15/2019 | |||||||||
Callable 05/15/2014 | 500,000 | 546,875 | |||||||
Shell International Finance BV (a) | |||||||||
1.875%, 03/25/2013 | 750,000 | 761,725 | |||||||
19,870,348 | |||||||||
Pharmaceuticals - 3.6% | |||||||||
Abbott Laboratories | |||||||||
5.15%, 11/30/2012 | 675,000 | 730,141 | |||||||
Eli Lilly & Company | |||||||||
4.20%, 03/06/2014 | 950,000 | 1,019,203 | |||||||
Teva Pharmaceutical Industries Ltd. (a): | |||||||||
3.00%, 06/15/2015 | 2,030,000 | 2,067,622 | |||||||
5.55%, 02/01/2016 | 1,860,000 | 2,097,818 | |||||||
5,914,784 | |||||||||
Road & Rail - 1.9% | |||||||||
Burlington Northern Santa Fe Corporation: | |||||||||
6.75%, 07/15/2011 | 1,000,000 | 1,033,988 | |||||||
5.65%, 05/01/2017 | 185,000 | 206,461 | |||||||
Norfolk Southern Corporation | |||||||||
5.257%, 09/17/2014 | 750,000 | 827,496 | |||||||
Union Pacific Corporation | |||||||||
6.125%, 01/15/2012 | 1,000,000 | 1,052,604 | |||||||
3,120,549 | |||||||||
Software - 3.3% | |||||||||
Adobe Systems Incorporated | |||||||||
3.25%, 02/01/2015 | 1,925,000 | 1,962,909 | |||||||
Microsoft Corporation | |||||||||
2.95%, 06/01/2014 | 1,910,000 | 1,989,878 | |||||||
Oracle Corporation | |||||||||
5.25%, 01/15/2016 | 1,257,000 | 1,414,800 | |||||||
5,367,587 |
The accompanying notes are an integral part of these financial statements.
26
LKCM Fixed Income Fund |
Schedule of Investments, Continued |
December 31, 2010
Principal | |||||||||
CORPORATE BONDS | Amount | Value | |||||||
Specialty Retail - 1.3% | |||||||||
Lowe’s Companies, Inc. | |||||||||
5.00%, 10/15/2015 | $ | 525,000 | $ | 583,230 | |||||
The Sherwin-Williams Company | |||||||||
3.125%, 12/15/2014 | 1,450,000 | 1,493,324 | |||||||
2,076,554 | |||||||||
TOTAL CORPORATE BONDS | |||||||||
(Cost $138,111,123) | 146,110,771 | ||||||||
PREFERRED STOCKS - 0.5% | Shares | ||||||||
Investment Bank & Brokerage - 0.5% | |||||||||
The Goldman Sachs Group, Inc. | |||||||||
Callable 02/02/2011 | 40,000 | 840,800 | |||||||
TOTAL PREFERRED STOCKS | |||||||||
(Cost $1,000,000) | 840,800 | ||||||||
U.S. GOVERNMENT & | Principal | ||||||||
AGENCY ISSUES - 5.2% | Amount | ||||||||
Fannie Mae - 0.7% | |||||||||
5.00%, 03/15/2016 | $ | 1,000,000 | 1,131,039 | ||||||
Federal Home Loan Bank - 1.1% | |||||||||
5.50%, 08/13/2014 | 500,000 | 572,444 | |||||||
4.875%, 05/17/2017 | 1,000,000 | 1,128,863 | |||||||
1,701,307 | |||||||||
Freddie Mac - 1.3% | |||||||||
5.55%, 10/04/2016 | |||||||||
Callable 10/04/2011 | 1,500,000 | 1,554,526 | |||||||
5.125%, 11/17/2017 | 500,000 | 570,192 | |||||||
2,124,718 | |||||||||
U.S. Treasury Inflation Indexed Bonds - 1.1% | |||||||||
2.375%, 04/15/2011 | 495,850 | 500,577 | |||||||
3.375%, 01/15/2012 | 1,231,730 | 1,288,409 | |||||||
1,788,986 | |||||||||
U.S. Treasury Notes - 1.0% | |||||||||
4.25%, 11/15/2014 | 500,000 | 552,852 | |||||||
4.25%, 08/15/2015 | 500,000 | 553,711 | |||||||
4.50%, 02/15/2016 | 500,000 | 559,961 | |||||||
1,666,524 | |||||||||
TOTAL U.S. GOVERNMENT & | |||||||||
AGENCY ISSUES | |||||||||
(Cost $7,803,014) | 8,412,574 | ||||||||
SHORT-TERM INVESTMENTS - 2.6% | |||||||||
Corporate Bonds - 0.6% | |||||||||
Kohl’s Corporation | |||||||||
6.30%, 03/01/2011 | 850,000 | 857,130 | |||||||
Progress Energy, Inc. | |||||||||
7.10%, 03/01/2011 | 168,000 | 169,716 | |||||||
1,026,846 | |||||||||
Shares | |||||||||
Money Market Funds (b) - 2.0% | |||||||||
Federated Government Obligations | |||||||||
Fund - Institutional Shares, 0.02% | 3,161,543 | 3,161,543 | |||||||
TOTAL SHORT-TERM | |||||||||
INVESTMENTS | |||||||||
(Cost $4,188,925) | 4,188,389 | ||||||||
Total Investments - 98.3% | |||||||||
(Cost $151,103,062) | 159,552,534 | ||||||||
Other Assets in Excess of Liabilities - 1.7% | 2,800,042 | ||||||||
TOTAL NET ASSETS - 100.0% | $ | 162,352,576 |
(a)U.S. Dollar-denominated foreign security.
(b)The rate quoted is the annualized seven-day yield of the fund at period end.
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
27
LKCM International Fund |
Schedule of Investments |
December 31, 2010
COMMON STOCKS - 92.3% | Shares | Value (US$) | |||||||
AUSTRALIA - 6.1% | |||||||||
Airlines - 0.4% | |||||||||
Qantas Airways Limited (a) | 56,307 | $ | 146,280 | ||||||
Chemicals - 0.2% | |||||||||
Incitec Pivot Limited | 17,881 | 72,423 | |||||||
Commercial Banks - 1.9% | |||||||||
Australia and New Zealand Banking | |||||||||
Group Limited | 15,301 | 365,424 | |||||||
National Australia Bank Limited | 12,725 | 308,458 | |||||||
673,882 | |||||||||
Commercial Services & Supplies - 0.5% | |||||||||
Brambles Limited | 24,476 | 178,242 | |||||||
Containers & Packaging - 0.5% | |||||||||
Amcor Limited | 24,794 | 171,175 | |||||||
Diversified Operations - 1.0% | |||||||||
BHP Billiton Limited | 8,015 | 370,947 | |||||||
Hotels, Restaurants & Leisure - 0.2% | |||||||||
TABCORP Holdings Limited (a) | 2,873 | 20,893 | |||||||
TABCORP Holdings Limited | 10,278 | 74,743 | |||||||
95,636 | |||||||||
Insurance - 0.1% | |||||||||
QBE Insurance Group Limited | 1,957 | 36,329 | |||||||
Metals & Mining - 0.8% | |||||||||
Alumina Limited | 11,292 | 28,643 | |||||||
Newcrest Mining Limited | 2,013 | 83,262 | |||||||
Paladin Energy Limited (a) | 8,314 | 41,922 | |||||||
Rio Tinto Limited | 1,400 | 122,386 | |||||||
276,213 | |||||||||
Oil & Gas Exploration & | |||||||||
Production Companies - 0.5% | |||||||||
Origin Energy Limited | 5,536 | 94,333 | |||||||
Woodside Petroleum Limited | 2,424 | 105,517 | |||||||
199,850 | |||||||||
Total Australia | 2,220,977 | ||||||||
DENMARK - 0.9% | |||||||||
Beverages - 0.9% | |||||||||
Carlsberg A/S - B Shares | 3,402 | 340,624 | |||||||
Total Denmark | 340,624 | ||||||||
FRANCE - 5.3% | |||||||||
Electronic Equipment & Instruments - 2.0% | |||||||||
Schneider Electric SA | 4,924 | 736,958 | |||||||
Food Products - 1.5% | |||||||||
DANONE S.A. | 8,896 | 558,964 | |||||||
Road & Rail - 1.8% | |||||||||
Groupe Eurotunnel SA (a) | 41,290 | 363,059 | |||||||
Groupe Eurotunnel SA | 30,507 | 268,246 | |||||||
631,305 | |||||||||
Total France | 1,927,227 | ||||||||
GERMANY - 10.5% | |||||||||
Automobiles - 2.3% | |||||||||
Continental AG (a) | 10,514 | 830,914 | |||||||
Chemicals - 3.4% | |||||||||
Bayer AG | 16,665 | 1,231,508 | |||||||
Machinery - 2.1% | |||||||||
MAN SE | 6,442 | 766,070 | |||||||
Metals & Mining - 2.0% | |||||||||
ThyssenKrupp AG | 16,940 | 701,410 | |||||||
Textiles, Apparel & Luxury Goods - 0.7% | |||||||||
Adidas AG | 3,835 | 250,549 | |||||||
Total Germany | 3,780,451 | ||||||||
HONG KONG - 1.7% | |||||||||
Commercial Banks - 0.2% | |||||||||
BOC Hong Kong (Holdings) Limited | 14,000 | 47,640 | |||||||
Chongqing Rural Commercial | |||||||||
Bank Co., Ltd. (a) | 43,000 | 28,933 | |||||||
76,573 | |||||||||
Diversified Operations - 0.7% | |||||||||
First Pacific Company Limited | 131,839 | 118,731 | |||||||
Hutchison Whampoa Limited | 6,000 | 61,754 | |||||||
The Wharf Holdings Limited | 8,000 | 61,548 | |||||||
242,033 | |||||||||
Electric Utilities - 0.2% | |||||||||
Hongkong Electric Holdings Limited | 8,500 | 53,584 | |||||||
Machinery - 0.3% | |||||||||
Singamas Container Holdings Limited (a) | 316,828 | 101,495 | |||||||
Media - 0.1% | |||||||||
Television Broadcasts Limited | 8,000 | 43,228 | |||||||
Real Estate - 0.2% | |||||||||
Swire Pacific Limited | 5,000 | 82,210 | |||||||
Total Hong Kong | 599,123 | ||||||||
JAPAN - 29.5% | |||||||||
Auto Components - 0.9% | |||||||||
BRIDGESTONE CORPORATION | 9,000 | 173,925 | |||||||
DENSO CORPORATION | 4,800 | 165,656 | |||||||
339,581 |
The accompanying notes are an integral part of these financial statements.
28
LKCM International Fund |
Schedule of Investments, Continued |
December 31, 2010
COMMON STOCKS | Shares | Value (US$) | |||||||
Automobiles - 3.6% | |||||||||
HONDA MOTOR CO., LTD. | 3,800 | $ | 150,474 | ||||||
Mazda Motor Corporation | 41,000 | 117,662 | |||||||
NISSAN MOTOR CO., LTD. | 42,000 | 399,877 | |||||||
Toyota Motor Corporation | 15,400 | 610,765 | |||||||
1,278,778 | |||||||||
Building Products - 1.0% | |||||||||
Nippon Sheet Glass Company, Limited | 127,000 | 342,567 | |||||||
Chemicals - 0.8% | |||||||||
JSR Corporation | 6,400 | 119,424 | |||||||
Ube Industries, Ltd. | 52,000 | 156,275 | |||||||
275,699 | |||||||||
Commercial Banks - 3.7% | |||||||||
Mitsubishi UFJ Financial Group, Inc. | 76,400 | 413,100 | |||||||
Mizuho Financial Group, Inc. | 170,500 | 321,302 | |||||||
Sumitomo Mitsui Financial Group, Inc. | 16,758 | 596,923 | |||||||
1,331,325 | |||||||||
Computers & Peripherals - 0.4% | |||||||||
FUJITSU LIMITED | 19,000 | 132,221 | |||||||
Distributors - 1.9% | |||||||||
Mitsubishi Corporation | 13,606 | 368,346 | |||||||
MITSUI & CO., LTD. | 18,000 | 297,302 | |||||||
665,648 | |||||||||
Electrical Equipment - 0.3% | |||||||||
Furukawa Electric Co., Ltd. | 24,000 | 107,895 | |||||||
Electronic Equipment & Instruments - 5.0% | |||||||||
FANUC LTD. | 700 | 107,513 | |||||||
Hitachi, Ltd. (a) | 95,000 | 506,651 | |||||||
NIDEC CORPORATION | 3,228 | 326,418 | |||||||
Nippon Electric Glass Co., Ltd. | 10,000 | 144,353 | |||||||
OMRON Corporation | 12,862 | 340,758 | |||||||
PIONEER CORPORATION (a) | 29,400 | 121,670 | |||||||
Sony Corporation | 7,500 | 270,385 | |||||||
1,817,748 | |||||||||
Financial Services - 1.3% | |||||||||
Credit Saison Co., Ltd. | 8,000 | 131,543 | |||||||
ORIX Corporation | 3,551 | 349,458 | |||||||
481,001 | |||||||||
Insurance - 0.4% | |||||||||
T & D Holdings, Inc. | 6,200 | 157,310 | |||||||
Internet & Catalog Retail - 0.5% | |||||||||
DeNA Co., Ltd. | 4,900 | 175,746 | |||||||
IT Services - 0.3% | |||||||||
Nomura Research Institute, Ltd. | 4,600 | 102,436 | |||||||
Machinery - 3.0% | |||||||||
KOMATSU LTD. | 11,090 | 335,609 | |||||||
KUBOTA CORPORATION | 17,000 | 161,017 | |||||||
SMC CORPORATION | 1,200 | 205,592 | |||||||
SUMITOMO HEAVY INDUSTRIES, LTD. | 61,446 | 395,059 | |||||||
1,097,277 | |||||||||
Media - 0.1% | |||||||||
FUJI MEDIA HOLDINGS, INC. | 23 | 36,374 | |||||||
Metals & Mining - 0.8% | |||||||||
JFE Holdings, Inc. | 5,000 | 174,159 | |||||||
MITSUBISHI MATERIALS | |||||||||
CORPORATION (a) | 39,000 | 124,412 | |||||||
298,571 | |||||||||
Office Electronics - 0.7% | |||||||||
CANON INC. | 5,000 | 259,269 | |||||||
Oil & Gas Exploration & Production | |||||||||
Companies - 1.0% | |||||||||
INPEX CORPORATION | 34 | 199,126 | |||||||
JX Holdings, Inc. | 26,000 | 176,450 | |||||||
375,576 | |||||||||
Pharmaceuticals - 0.5% | |||||||||
DAIICHI SANKYO COMPANY, LIMITED | 7,800 | 170,718 | |||||||
Professional Services - 0.8% | |||||||||
DENTSU INC. | 9,300 | 288,771 | |||||||
Real Estate - 1.7% | |||||||||
DAIWA HOUSE INDUSTRY CO., LTD. | 8,000 | 98,337 | |||||||
Mitsubishi Estate Company Ltd. | 11,000 | 204,040 | |||||||
NTT URBAN DEVELOPMENT | |||||||||
CORPORATION | 312 | 307,427 | |||||||
609,804 | |||||||||
Semiconductor & Semiconductor | |||||||||
Equipment - 0.5% | |||||||||
Tokyo Electron Limited | 2,900 | 183,594 | |||||||
Specialty Retail - 0.3% | |||||||||
YAMADA DENKI CO., LTD. | 1,800 | 122,823 | |||||||
Total Japan | 10,650,732 | ||||||||
LUXEMBOURG - 0.7% | |||||||||
Metals & Mining - 0.7% | |||||||||
ArcelorMittal | 7,073 | 268,240 | |||||||
Total Luxembourg | 268,240 | ||||||||
NETHERLANDS - 4.8% | |||||||||
Diversified Financial Services - 1.9% | |||||||||
ING Groep N.V. (a) | 68,725 | 668,579 | |||||||
Oil & Gas Exploration & Production | |||||||||
Companies - 2.9% | |||||||||
Royal Dutch Shell plc - Class A | 31,916 | 1,054,726 | |||||||
Total Netherlands | 1,723,305 |
The accompanying notes are an integral part of these financial statements.
29
LKCM International Fund |
Schedule of Investments, Continued |
December 31, 2010
COMMON STOCKS | Shares | Value (US$) | |||||||
RUSSIA - 0.4% | |||||||||
Oil & Gas Exploration & Production | |||||||||
Companies - 0.4% | |||||||||
LUKOIL - ADR | 2,750 | $ | 155,375 | ||||||
Total Russia | �� | 155,375 | |||||||
SINGAPORE - 1.4% | |||||||||
Commercial Banks - 0.2% | |||||||||
United Overseas Bank Limited | 10,282 | 79,157 | |||||||
Distributors - 0.1% | |||||||||
Noble Group Limited | 27,000 | 45,654 | |||||||
Diversified Operations - 0.4% | |||||||||
Keppel Corporation Limited | 14,378 | 126,824 | |||||||
Food Products - 0.3% | |||||||||
China Minzhong Food Corporation Ltd. (a) | 84,000 | 89,017 | |||||||
Hotels, Restaurants & Leisure - 0.2% | |||||||||
Overseas Union Enterprise Limited | 24,000 | 61,526 | |||||||
Investment Companies - 0.1% | |||||||||
K-Green Trust (a) | 53,200 | 44,356 | |||||||
Real Estate - 0.1% | |||||||||
Hongkong Land Holdings Limited | 7,000 | 50,540 | |||||||
Total Singapore | 497,074 | ||||||||
SWITZERLAND - 1.5% | |||||||||
Textiles, Apparel & Luxury Goods - 1.5% | |||||||||
Compagnie Financiere Richemont SA | 8,998 | 529,294 | |||||||
Total Switzerland | 529,294 | ||||||||
TAIWAN - 0.3% | |||||||||
Semiconductor & Semiconductor | |||||||||
Equipment - 0.3% | |||||||||
Advanced Semiconductor Engineering Inc. | 36,000 | 41,672 | |||||||
Taiwan Semiconductor Manufacturing | |||||||||
Company Ltd. | 22,000 | 53,573 | |||||||
95,245 | |||||||||
Total Taiwan | 95,245 | ||||||||
UNITED KINGDOM - 29.2% | |||||||||
Aerospace & Defense - 1.5% | |||||||||
BAE Systems plc | 108,755 | 559,544 | |||||||
Airlines - 1.9% | |||||||||
British Airways plc (a) | 163,549 | 694,841 | |||||||
Commercial Banks - 7.7% | |||||||||
Barclays plc | 222,263 | 906,690 | |||||||
Lloyds Banking Group plc (a) | 1,020,627 | 1,045,451 | |||||||
Royal Bank of Scotland Group plc (a) | 1,364,443 | 831,132 | |||||||
2,783,273 | |||||||||
Diversified Operations - 2.0% | |||||||||
Rolls-Royce Group plc (a) | 72,527 | 704,464 | |||||||
Rolls-Royce Group - C Shares (a) | 5,159,872 | 8,045 | |||||||
712,509 | |||||||||
Food & Staples Retailing - 2.0% | |||||||||
Tesco plc | 110,730 | 733,711 | |||||||
Hotels, Restaurants & Leisure - 1.1% | |||||||||
Carnival plc | 8,654 | 402,342 | |||||||
Investment Companies - 0.4% | |||||||||
Vallar PLC (a) | 7,695 | 133,769 | |||||||
Metals & Mining - 6.4% | |||||||||
Rio Tinto plc | 14,792 | 1,034,679 | |||||||
Xstrata plc | 53,469 | 1,255,029 | |||||||
2,289,708 | |||||||||
Oil & Gas Exploration & Production | |||||||||
Companies - 1.4% | |||||||||
BP plc | 70,230 | 509,753 | |||||||
Pharmaceuticals - 2.8% | |||||||||
AstraZeneca plc | 8,503 | 387,368 | |||||||
GlaxoSmithKline plc | 32,069 | 619,980 | |||||||
1,007,348 | |||||||||
Specialty Retail - 1.0% | |||||||||
Kingfisher plc | 88,444 | 363,208 | |||||||
Tobacco - 1.0% | |||||||||
Imperial Tobacco Group plc | 12,194 | 374,147 | |||||||
Total United Kingdom | 10,564,153 | ||||||||
TOTAL COMMON STOCKS | |||||||||
(Cost $29,927,701) | 33,351,820 | ||||||||
PREFERRED STOCKS - 4.6% | |||||||||
GERMANY - 4.6% | |||||||||
Automobiles - 4.6% | |||||||||
Porsche Automobil Holding SE | 8,699 | 693,521 | |||||||
Volkswagen AG | 5,960 | 966,878 | |||||||
1,660,399 | |||||||||
TOTAL PREFERRED STOCKS | |||||||||
(Cost $1,168,185) | 1,660,399 | ||||||||
WARRANTS - 0.7% | |||||||||
GERMANY - 0.7% | |||||||||
Commercial Banks - 0.7% | |||||||||
Deutsche Bank AG London LEPO | |||||||||
Expiration: 02/28/2018 | 71,761 | 244,490 | |||||||
TOTAL WARRANTS | |||||||||
(Cost $200,321) | 244,490 |
The accompanying notes are an integral part of these financial statements.
30
LKCM International Fund |
Schedule of Investments, Continued |
December 31, 2010
SHORT-TERM INVESTMENTS - 0.1% | Shares | Value (US$) | |||||||
Money Market Funds (b) - 0.1% | |||||||||
Dreyfus Cash Management | |||||||||
Fund - Investor Shares, 0.00% | 38,812 | $ | 38,812 | ||||||
TOTAL SHORT-TERM INVESTMENTS | |||||||||
(Cost $38,812) | 38,812 | ||||||||
Total Investments - 97.7% | |||||||||
(Cost $31,335,019) | 35,295,521 | ||||||||
Other Assets in Excess of Liabilities - 2.3% | 820,184 | ||||||||
TOTAL NET ASSETS - 100.0% | $ | 36,115,705 |
ADR American Depository Receipt.
LEPO Low exercise price option.
(a) Non-income producing security.
(b)The rate quoted is the annualized seven-day yield of the fund at period end.
Forward Currency Exchange Contracts
At December 31, 2010, the Fund had entered into “position hedge” forward currency exchange contracts that obligated the Fund to deliver and receive specified amounts of currencies in exchange for U.S. dollars at a specified future date. The contracts combined had net unrealized appreciation of $147,660 as of December 31, 2010. The terms of the open contracts are as follows:
Settlement | Currency to | Currency to | ||||||||||||||||
Date | be Delivered | be Received | Asset | Liability | ||||||||||||||
1/13/11 | 640,000 | EURO | $ | 45,750 | ||||||||||||||
1/13/11 | 874,496 | AUD | $ | 8,059 | ||||||||||||||
1/13/11 | 1,710,000 | EURO | 152,767 | |||||||||||||||
1/13/11 | 2,245,266 | CHF | 36,009 | |||||||||||||||
1/13/11 | 1,876,399 | GBP | 55,281 | |||||||||||||||
1/13/11 | 2,228,000 | EURO | 3,221 | |||||||||||||||
1/13/11 | 216,328,680 | JPY | 38,231 | |||||||||||||||
1/13/11 | 1,960,000 | EURO | 83,965 | |||||||||||||||
1/13/11 | 190,000 | EURO | 13,152 | |||||||||||||||
1/13/11 | 1,537,860 | NOK | 3,643 | |||||||||||||||
1/13/11 | 200,000 | EURO | 8,060 | |||||||||||||||
1/13/11 | 959,660 | ILS | 4,945 | |||||||||||||||
1/13/11 | 300,000 | EURO | — | |||||||||||||||
1/13/11 | 3,051,150 | HDK | 8,292 | |||||||||||||||
1/13/11 | 810,000 | EURO | 38,468 | |||||||||||||||
1/13/11 | 7,430,778 | SEK | 16,500 | |||||||||||||||
1/13/11 | 70,000 | EURO | 1,856 | |||||||||||||||
1/13/11 | 120,107 | SGD | 1,807 | |||||||||||||||
1/20/11 | 120,244,696 | JPY | — | |||||||||||||||
1/20/11 | 1,430,000 | USD | 51,371 | |||||||||||||||
1/20/11 | 356,000 | USD | 11,907 | |||||||||||||||
1/20/11 | 29,863,416 | JPY | — | |||||||||||||||
$ | 365,472 | $ | 217,812 |
AUD | Australian Dollar | |
CHF | Swiss Franc | |
EURO | Euro | |
GBP | British Pound | |
HDK | Hong Kong Dollar | |
ILS | Israeli Shekel | |
JPY | Japanese Yen | |
NOK | Norwegian Kroner | |
SEK | Swedish Krona | |
SGD | Singapore Dollar | |
USD | U.S. Dollar |
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
31
Statement of Assets and Liabilities |
December 31, 2010 |
LKCM | LKCM | LKCM | LKCM | LKCM | ||||||||||||||||
Small Cap | Equity | Balanced | Fixed | International | ||||||||||||||||
Equity Fund | Fund | Fund | Income Fund | Fund | ||||||||||||||||
Assets: | ||||||||||||||||||||
Investments, at value* | $ | 734,079,288 | $ | 72,266,088 | $ | 16,443,475 | $ | 159,552,534 | $ | 35,295,521 | ||||||||||
Foreign currency** | — | — | — | — | 611,286 | |||||||||||||||
Dividends and interest receivable | 157,869 | 40,474 | 55,229 | 1,989,003 | 81,740 | |||||||||||||||
Unrealized gain on open forward foreign currency contracts | — | — | — | — | 365,472 | |||||||||||||||
Receivable for investments sold | — | — | — | — | 23,653 | |||||||||||||||
Receivable for fund shares sold | 2,021,373 | 187,507 | 7,900 | 1,045,477 | 28,087 | |||||||||||||||
Other assets | 58,120 | 18,541 | 5,136 | 17,291 | 7,643 | |||||||||||||||
Total assets | 736,316,650 | 72,512,610 | 16,511,740 | 162,604,305 | 36,413,402 | |||||||||||||||
Liabilities: | ||||||||||||||||||||
Unrealized loss on open forward foreign currency contracts | — | — | — | — | 217,812 | |||||||||||||||
Payable for investment advisory fees | 1,292,921 | 78,251 | 8,270 | 179,097 | 23,926 | |||||||||||||||
Payable for fund shares redeemed | 116,964 | 30,298 | — | 6,000 | — | |||||||||||||||
Distribution expense payable | 24,398 | — | — | — | — | |||||||||||||||
Accrued expenses and other liabilities | 247,727 | 34,411 | 17,117 | 66,632 | 55,959 | |||||||||||||||
Total liabilities | 1,682,010 | 142,960 | 25,387 | 251,729 | 297,697 | |||||||||||||||
Net assets | $ | 734,634,640 | $ | 72,369,650 | $ | 16,486,353 | $ | 162,352,576 | $ | 36,115,705 | ||||||||||
Net assets consist of: | ||||||||||||||||||||
Paid in capital | $ | 604,872,848 | $ | 55,665,236 | $ | 13,741,445 | $ | 153,482,315 | $ | 71,557,089 | ||||||||||
Undistributed net investment income | — | — | 2,456 | — | 561,001 | |||||||||||||||
Accumulated net realized gain (loss) on | ||||||||||||||||||||
securities and foreign currency transactions | (71,739,544 | ) | 845,404 | (475,164 | ) | 420,789 | (40,127,225 | ) | ||||||||||||
Net unrealized appreciation on: | ||||||||||||||||||||
Investments | 201,501,336 | 15,859,010 | 3,217,616 | 8,449,472 | 3,960,502 | |||||||||||||||
Other assets and liabilities denominated | ||||||||||||||||||||
in foreign currency | — | — | — | — | 164,338 | |||||||||||||||
Net assets | $ | 734,634,640 | $ | 72,369,650 | $ | 16,486,353 | $ | 162,352,576 | $ | 36,115,705 | ||||||||||
INSTITUTIONAL CLASS*** | ||||||||||||||||||||
Net assets | $ | 690,510,765 | $ | 72,369,650 | $ | 16,486,353 | $ | 162,352,576 | $ | 36,115,705 | ||||||||||
Shares of beneficial interest outstanding | ||||||||||||||||||||
(unlimited shares of no par value authorized) | 32,136,377 | 4,768,558 | 1,156,998 | 14,713,137 | 4,345,382 | |||||||||||||||
Net asset value per share | ||||||||||||||||||||
(offering and redemption price) | $ | 21.49 | $ | 15.18 | $ | 14.25 | $ | 11.03 | $ | 8.31 | ||||||||||
ADVISER CLASS | ||||||||||||||||||||
Net assets | $ | 44,123,875 | ||||||||||||||||||
Shares of beneficial interest outstanding | ||||||||||||||||||||
(unlimited shares of no par value authorized) | 2,101,547 | |||||||||||||||||||
Net asset value per share | ||||||||||||||||||||
(offering and redemption price) | $ | 21.00 | ||||||||||||||||||
* Cost of Investments | $ | 532,577,952 | $ | 56,407,078 | $ | 13,225,859 | $ | 151,103,062 | $ | 31,335,019 | ||||||||||
** Cost of Foreign Currency | $ | — | $ | — | $ | — | $ | — | $ | 597,429 |
*** Currently, only the Small Cap Equity Fund offers a second class. The Equity Fund has authorized a second class, but has not yet commenced sales.
The accompanying notes are an integral part of these financial statements.
32
Statement of Operations |
For the Year Ended December 31, 2010 |
LKCM | LKCM | LKCM | LKCM | LKCM | ||||||||||||||||
Small Cap | Equity | Balanced | Fixed | International | ||||||||||||||||
Equity Fund | Fund | Fund | Income Fund | Fund | ||||||||||||||||
Investment Income: | ||||||||||||||||||||
Dividends * | $ | 3,523,423 | $ | 806,154 | $ | 156,928 | $ | 38,020 | $ | 762,374 | ||||||||||
Interest | 7,242 | 1,620 | 151,424 | 6,670,547 | 376 | |||||||||||||||
Total income | 3,530,665 | 807,774 | 308,352 | 6,708,567 | 762,750 | |||||||||||||||
Expenses: | ||||||||||||||||||||
Investment advisory fees | 4,561,545 | 394,979 | 93,582 | 784,666 | 381,799 | |||||||||||||||
Distribution expense - Adviser Class (Note B) | 96,428 | — | — | — | — | |||||||||||||||
Administrative fees | 510,583 | 51,100 | 20,125 | 127,356 | 45,225 | |||||||||||||||
Accounting and transfer agent fees and expenses | 261,680 | 67,360 | 41,528 | 94,135 | 88,842 | |||||||||||||||
Professional fees | 139,993 | 15,897 | 6,854 | 40,795 | 12,920 | |||||||||||||||
Custody fees and expenses | 75,235 | 7,676 | 4,030 | 16,460 | 156,329 | |||||||||||||||
Federal and state registration | 71,597 | 33,226 | 8,738 | 21,884 | 14,352 | |||||||||||||||
Trustees’ fees | 66,863 | 6,000 | 1,686 | 18,481 | 5,011 | |||||||||||||||
Reports to shareholders | 38,523 | 2,100 | 520 | 4,918 | 1,440 | |||||||||||||||
Other | 120,735 | 10,684 | 2,939 | 32,173 | 8,341 | |||||||||||||||
Total expenses | 5,943,182 | 589,022 | 180,002 | 1,140,868 | 714,259 | |||||||||||||||
Less, expense waiver and/or | ||||||||||||||||||||
reimbursement (Note B) | — | (137,617 | ) | (64,824 | ) | (120,803 | ) | (254,640 | ) | |||||||||||
Net expenses | 5,943,182 | 451,405 | 115,178 | 1,020,065 | 459,619 | |||||||||||||||
Net investment income (loss) | (2,412,517 | ) | 356,369 | 193,174 | 5,688,502 | 303,131 | ||||||||||||||
Realized and Unrealized Gain on Investments: | ||||||||||||||||||||
Net realized gain on: | ||||||||||||||||||||
Investments | 61,883,308 | 2,560,907 | 241,576 | 989,099 | 1,302,478 | |||||||||||||||
Foreign currency transactions | — | — | — | — | 333,442 | |||||||||||||||
61,883,308 | 2,560,907 | 241,576 | 989,099 | 1,635,920 | ||||||||||||||||
Net change in unrealized | ||||||||||||||||||||
appreciation/depreciation on: | ||||||||||||||||||||
Investments | 123,384,121 | 7,275,495 | 1,014,807 | 2,215,990 | 2,020,135 | |||||||||||||||
Foreign currency transactions | — | — | — | — | 65,489 | |||||||||||||||
123,384,121 | 7,275,495 | 1,014,807 | 2,215,990 | 2,085,624 | ||||||||||||||||
Net Realized and Unrealized Gain on Investments | 185,267,429 | 9,836,402 | 1,256,383 | 3,205,089 | 3,721,544 | |||||||||||||||
Net Increase in Net Assets | ||||||||||||||||||||
Resulting from Operations | $ | 182,854,912 | $ | 10,192,771 | $ | 1,449,557 | $ | 8,893,591 | $ | 4,024,675 | ||||||||||
* Net of foreign taxes withheld | $ | 15,206 | $ | 726 | $ | 614 | $ | — | $ | 84,860 |
The accompanying notes are an integral part of these financial statements.
33
Statements of Changes in Net Assets |
LKCM Small Cap | LKCM | |||||||||||||||
Equity Fund | Equity Fund | |||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Operations: | ||||||||||||||||
Net investment income (loss) | $ | (2,412,517 | ) | $ | (1,690,657 | ) | $ | 356,369 | $ | 382,865 | ||||||
Net realized gain (loss) on investments | 61,883,308 | (54,284,096 | ) | 2,560,907 | 125,457 | |||||||||||
Net change in unrealized | ||||||||||||||||
appreciation/depreciation on investments | 123,384,121 | 193,230,455 | 7,275,495 | 9,504,072 | ||||||||||||
Net increase in net assets resulting from operations | 182,854,912 | 137,255,702 | 10,192,771 | 10,012,394 | ||||||||||||
Dividends and Distributions to | ||||||||||||||||
Institutional Class Shareholders: | ||||||||||||||||
Net investment income | — | — | (363,260 | ) | (380,347 | ) | ||||||||||
Net realized gain on investments | — | — | (361,522 | ) | — | |||||||||||
— | — | (724,782 | ) | (380,347 | ) | |||||||||||
Net increase (decrease) in net assets from | ||||||||||||||||
Fund share transactions (Note C) | (13,111,435 | ) | 17,487,630 | 13,744,831 | 2,848,036 | |||||||||||
Total increase in net assets | 169,743,477 | 154,743,332 | 23,212,820 | 12,480,083 | ||||||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 564,891,163 | 410,147,831 | 49,156,830 | 36,676,747 | ||||||||||||
End of period * | $ | 734,634,640 | $ | 564,891,163 | $ | 72,369,650 | $ | 49,156,830 | ||||||||
* Including undistributed net investment income of | $ | — | $ | — | $ | — | $ | 3,115 | ||||||||
LKCM | LKCM | |||||||||||||||
Balanced Fund | Fixed Income Fund | |||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Operations: | ||||||||||||||||
Net investment income | $ | 193,174 | $ | 211,962 | $ | 5,688,502 | $ | 5,387,238 | ||||||||
Net realized gain (loss) on investments | 241,576 | (35,549 | ) | 989,099 | 1,432,482 | |||||||||||
Net change in unrealized | ||||||||||||||||
appreciation/depreciation on investments | 1,014,807 | 2,189,309 | 2,215,990 | 6,404,470 | ||||||||||||
Net increase in net assets resulting from operations | 1,449,557 | 2,365,722 | 8,893,591 | 13,224,190 | ||||||||||||
Dividends and Distributions to Shareholders: | ||||||||||||||||
Net investment income | (194,657 | ) | (210,329 | ) | (5,707,218 | ) | (5,397,151 | ) | ||||||||
Net realized gain on investments | — | — | (636,805 | ) | — | |||||||||||
(194,657 | ) | (210,329 | ) | (6,344,023 | ) | (5,397,151 | ) | |||||||||
Net increase in net assets from | ||||||||||||||||
Fund share transactions (Note C) | 1,755,123 | 1,165,009 | 10,584,768 | 20,716,960 | ||||||||||||
Total increase in net assets | 3,010,023 | 3,320,402 | 13,134,336 | 28,543,999 | ||||||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 13,476,330 | 10,155,928 | 149,218,240 | 120,674,241 | ||||||||||||
End of period * | $ | 16,486,353 | $ | 13,476,330 | $ | 162,352,576 | $ | 149,218,240 | ||||||||
* Including undistributed net investment income of | $ | 2,456 | $ | 2,160 | $ | — | $ | — |
The accompanying notes are an integral part of these financial statements.
34
Statements of Changes in Net Assets |
LKCM | ||||||||
International Fund | ||||||||
Year Ended | Year Ended | |||||||
December 31, | December 31, | |||||||
2010 | 2009 | |||||||
Operations: | ||||||||
Net investment income | $ | 303,131 | $ | 525,542 | ||||
Net realized gain (loss) on investments, futures contracts and foreign currency transactions | 1,635,920 | (7,749,195 | ) | |||||
Net change in unrealized appreciation/depreciation | 2,085,624 | 16,827,949 | ||||||
Net increase in net assets resulting from operations | 4,024,675 | 9,604,296 | ||||||
Dividends and Distributions to Shareholders: | ||||||||
Net investment income | (474,770 | ) | (2,454,865 | ) | ||||
Net decrease in net assets from Fund share transactions (Note C) | (10,806,339 | ) | (1,008,501 | ) | ||||
Total increase (decrease) in net assets | (7,256,434 | ) | 6,140,930 | |||||
Net Assets: | ||||||||
Beginning of period | 43,372,139 | 37,231,209 | ||||||
End of period * | $ | 36,115,705 | $ | 43,372,139 | ||||
* Including undistributed net investment income of | $ | 561,001 | $ | 366,733 |
The accompanying notes are an integral part of these financial statements.
35
Financial Highlights |
Selected Data for Each Share of Capital Stock Outstanding |
LKCM Small Cap Equity Fund – Institutional Class | ||||||||||||||||||||
Year | Year | Year | Year | Year | ||||||||||||||||
Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Net Asset Value - Beginning of Period | $ | 16.16 | $ | 12.24 | $ | 20.03 | $ | 21.98 | $ | 21.12 | ||||||||||
Net investment income (loss)(1) | (0.07 | ) | (0.05 | ) | (0.03 | ) | 0.01 | (0.04 | ) | |||||||||||
Net realized and unrealized gain (loss) on investments | 5.40 | 3.97 | (7.75 | ) | (0.17 | ) | 3.22 | |||||||||||||
Total from investment operations | 5.33 | 3.92 | (7.78 | ) | (0.16 | ) | 3.18 | |||||||||||||
Dividends from net investment income | — | — | — | (0.00 | )(2) | — | ||||||||||||||
Distributions from net realized gains | — | — | (0.01 | ) | (1.79 | ) | (2.32 | ) | ||||||||||||
Total dividends and distributions | — | — | (0.01 | ) | (1.79 | ) | (2.32 | ) | ||||||||||||
Net Asset Value - End of Period | $ | 21.49 | $ | 16.16 | $ | 12.24 | $ | 20.03 | $ | 21.98 | ||||||||||
Total Return | 32.98 | % | 32.03 | % | (38.87 | )% | (0.76 | )% | 14.98 | % | ||||||||||
Ratios and Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (thousands) | $ | 690,511 | $ | 529,166 | $ | 385,223 | $ | 595,175 | $ | 608,417 | ||||||||||
Ratio of expenses to average net assets: | 0.96 | % | 1.00 | % | 0.97 | % | 0.94 | % | 0.96 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | (0.38 | )% | (0.35 | )% | (0.17 | )% | 0.04 | % | (0.16 | )% | ||||||||||
Portfolio turnover rate(3) | 57 | % | 59 | % | 61 | % | 60 | % | 56 | % |
(1) Net investment income (loss) per share represents net investment income (loss) divided by the average shares outstanding throughout the period.
(2) Less than $(0.005).
(3) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
LKCM Small Cap Equity Fund – Adviser Class | ||||||||||||||||||||
Year | Year | Year | Year | Year | ||||||||||||||||
Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Net Asset Value - Beginning of Period | $ | 15.83 | $ | 12.02 | $ | 19.72 | $ | 21.73 | $ | 20.95 | ||||||||||
Net investment loss(1) | (0.11 | ) | (0.08 | ) | (0.07 | ) | (0.05 | ) | (0.09 | ) | ||||||||||
Net realized and unrealized gain (loss) on investments | 5.28 | 3.89 | (7.62 | ) | (0.17 | ) | 3.19 | |||||||||||||
Total from investment operations | 5.17 | 3.81 | (7.69 | ) | (0.22 | ) | 3.10 | |||||||||||||
Distributions from net realized gains | — | — | (0.01 | ) | (1.79 | ) | (2.32 | ) | ||||||||||||
Net Asset Value - End of Period | $ | 21.00 | $ | 15.83 | $ | 12.02 | $ | 19.72 | $ | 21.73 | ||||||||||
Total Return | 32.66 | % | 31.70 | % | (39.02 | )% | (1.06 | )% | 14.72 | % | ||||||||||
Ratios and Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (thousands) | $ | 44,124 | $ | 35,725 | $ | 24,925 | $ | 40,465 | $ | 20,923 | ||||||||||
Ratio of expenses to average net assets: | 1.21 | % | 1.25 | % | 1.22 | % | 1.19 | % | 1.21 | % | ||||||||||
Ratio of net investment loss to average net assets: | (0.63 | )% | (0.60 | )% | (0.42 | )% | (0.21 | )% | (0.41 | )% | ||||||||||
Portfolio turnover rate(2) | 57 | % | 59 | % | 61 | % | 60 | % | 56 | % |
(1) Net investment loss per share represents net investment loss divided by the average shares outstanding throughout the period.
(2) Portfolio turnover is calculated on the basis of the Fund as a whole without distinguishing between the classes of shares issued.
The accompanying notes are an integral part of these financial statements.
36
Financial Highlights |
Selected Data for Each Share of Capital Stock Outstanding |
LKCM Equity Fund | ||||||||||||||||||||
Year | Year | Year | Year | Year | ||||||||||||||||
Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Net Asset Value - Beginning of Period | $ | 13.02 | $ | 10.33 | $ | 15.38 | $ | 14.43 | $ | 13.30 | ||||||||||
Net investment income | 0.08 | 0.10 | 0.16 | 0.16 | 0.14 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 2.24 | 2.69 | (5.05 | ) | 1.42 | 1.55 | ||||||||||||||
Total from investment operations | 2.32 | 2.79 | (4.89 | ) | 1.58 | 1.69 | ||||||||||||||
Dividends from net investment income | (0.08 | ) | (0.10 | ) | (0.16 | ) | (0.16 | ) | (0.14 | ) | ||||||||||
Distributions from net realized gains | (0.08 | ) | — | — | (0.47 | ) | (0.42 | ) | ||||||||||||
Total dividends and distributions | (0.16 | ) | (0.10 | ) | (0.16 | ) | (0.63 | ) | (0.56 | ) | ||||||||||
Net Asset Value - End of Period | $ | 15.18 | $ | 13.02 | $ | 10.33 | $ | 15.38 | $ | 14.43 | ||||||||||
Total Return | 17.77 | % | 27.01 | % | (31.80 | )% | 10.96 | % | 12.65 | % | ||||||||||
Ratios and Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (thousands) | $ | 72,370 | $ | 49,157 | $ | 36,677 | $ | 53,743 | $ | 50,385 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Before expense waiver and/or reimbursement | 1.04 | % | 1.13 | % | 1.06 | % | 1.01 | % | 1.06 | % | ||||||||||
After expense waiver and/or reimbursement | 0.80 | % | 0.80 | % | 0.80 | % | 0.80 | % | 0.80 | % | ||||||||||
Ratio of net investment income to average net assets: | ||||||||||||||||||||
Before expense waiver and/or reimbursement | 0.39 | % | 0.62 | % | 0.85 | % | 0.82 | % | 0.71 | % | ||||||||||
After expense waiver and/or reimbursement | 0.63 | % | 0.95 | % | 1.11 | % | 1.03 | % | 0.97 | % | ||||||||||
Portfolio turnover rate | 23 | % | 26 | % | 31 | % | 26 | % | 24 | % |
LKCM Balanced Fund | ||||||||||||||||||||
Year | Year | Year | Year | Year | ||||||||||||||||
Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Net Asset Value - Beginning of Period | $ | 13.09 | $ | 10.85 | $ | 13.84 | $ | 13.36 | $ | 12.42 | ||||||||||
Net investment income | 0.18 | 0.22 | 0.26 | 0.28 | 0.25 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.16 | 2.24 | (2.96 | ) | 0.82 | 1.13 | ||||||||||||||
Total from investment operations | 1.34 | 2.46 | (2.70 | ) | 1.10 | 1.38 | ||||||||||||||
Dividends from net investment income | (0.18 | ) | (0.22 | ) | (0.28 | ) | (0.28 | ) | (0.26 | ) | ||||||||||
Distributions from net realized gains | — | — | (0.01 | ) | (0.34 | ) | (0.18 | ) | ||||||||||||
Total dividends and distributions | (0.18 | ) | (0.22 | ) | (0.29 | ) | (0.62 | ) | (0.44 | ) | ||||||||||
Net Asset Value - End of Period | $ | 14.25 | $ | 13.09 | $ | 10.85 | $ | 13.84 | $ | 13.36 | ||||||||||
Total Return | 10.31 | % | 22.90 | % | (19.70 | )% | 8.25 | % | 11.22 | % | ||||||||||
Ratios and Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (thousands) | $ | 16,486 | $ | 13,476 | $ | 10,156 | $ | 12,191 | $ | 9,922 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Before expense waiver and/or reimbursement | 1.25 | % | 1.41 | % | 1.38 | % | 1.35 | % | 1.45 | % | ||||||||||
After expense waiver and/or reimbursement | 0.80 | % | 0.80 | % | 0.80 | % | 0.80 | % | 0.80 | % | ||||||||||
Ratio of net investment income to average net assets: | ||||||||||||||||||||
Before expense waiver and/or reimbursement | 0.89 | % | 1.28 | % | 1.51 | % | 1.51 | % | 1.30 | % | ||||||||||
After expense waiver and/or reimbursement | 1.34 | % | 1.89 | % | 2.09 | % | 2.06 | % | 1.95 | % | ||||||||||
Portfolio turnover rate | 13 | % | 22 | % | 38 | % | 27 | % | 12 | % |
The accompanying notes are an integral part of these financial statements.
37
Financial Highlights |
Selected Data for Each Share of Capital Stock Outstanding |
LKCM Fixed Income Fund | ||||||||||||||||||||
Year | Year | Year | Year | Year | ||||||||||||||||
Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Net Asset Value - Beginning of Period | $ | 10.85 | $ | 10.20 | $ | 10.33 | $ | 10.19 | $ | 10.24 | ||||||||||
Net investment income | 0.40 | 0.43 | 0.43 | 0.46 | 0.44 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.22 | 0.65 | (0.13 | ) | 0.14 | (0.05 | ) | |||||||||||||
Total from investment operations | 0.62 | 1.08 | 0.30 | 0.60 | 0.39 | |||||||||||||||
Dividends from net investment income | (0.40 | ) | (0.43 | ) | (0.43 | ) | (0.46 | ) | (0.44 | ) | ||||||||||
Distributions from net realized gains | (0.04 | ) | — | — | — | — | ||||||||||||||
Total dividends and distributions | (0.44 | ) | (0.43 | ) | (0.43 | ) | (0.46 | ) | (0.44 | ) | ||||||||||
Net Asset Value - End of Period | $ | 11.03 | $ | 10.85 | $ | 10.20 | $ | 10.33 | $ | 10.19 | ||||||||||
Total Return | 5.82 | % | 10.77 | % | 2.99 | % | 5.96 | % | 3.96 | % | ||||||||||
Ratios and Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (thousands) | $ | 162,353 | $ | 149,218 | $ | 120,674 | $ | 113,032 | $ | 106,082 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Before expense waiver and/or reimbursement | 0.73 | % | 0.76 | % | 0.73 | % | 0.72 | % | 0.74 | % | ||||||||||
After expense waiver and/or reimbursement | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | ||||||||||
Ratio of net investment income to average net assets: | ||||||||||||||||||||
Before expense waiver and/or reimbursement | 3.55 | % | 4.00 | % | 4.15 | % | 4.39 | % | 4.14 | % | ||||||||||
After expense waiver and/or reimbursement | 3.63 | % | 4.11 | % | 4.23 | % | 4.46 | % | 4.23 | % | ||||||||||
Portfolio turnover rate | 20 | % | 30 | % | 23 | % | 31 | % | 30 | % |
LKCM International Fund | ||||||||||||||||||||
Year | Year | Year | Year | Year | ||||||||||||||||
Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Net Asset Value - Beginning of Period | $ | 7.53 | $ | 6.16 | $ | 12.41 | $ | 13.49 | $ | 11.10 | ||||||||||
Net investment income | 0.06 | (1) | 0.09 | (1) | 0.15 | (1) | 0.14 | (2) | 0.10 | (1) | ||||||||||
Net realized and unrealized gain (loss) on investments | 0.83 | 1.73 | (6.05 | ) | 1.93 | 2.95 | ||||||||||||||
Total from investment operations | 0.89 | 1.82 | (5.90 | ) | 2.07 | 3.05 | ||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.45 | ) | (0.11 | ) | (0.26 | ) | (0.16 | ) | ||||||||||
Distributions from net realized gains | — | — | (0.24 | ) | (2.89 | ) | (0.50 | ) | ||||||||||||
Total dividends and distributions | (0.11 | ) | (0.45 | ) | (0.35 | ) | (3.15 | ) | (0.66 | ) | ||||||||||
Net Asset Value - End of Period | $ | 8.31 | $ | 7.53 | $ | 6.16 | $ | 12.41 | $ | 13.49 | ||||||||||
Total Return | 11.83 | % | 29.51 | % | (47.55 | )% | 15.20 | % | 27.51 | % | ||||||||||
Ratios and Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (thousands) | $ | 36,116 | $ | 43,372 | $ | 37,231 | $ | 129,232 | $ | 136,295 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Before expense waiver and/or reimbursement | 1.87 | % | 1.91 | % | 1.42 | % | 1.31 | % | 1.34 | % | ||||||||||
After expense waiver and/or reimbursement | 1.20 | % | 1.20 | % | 1.20 | % | 1.20 | % | 1.20 | % | ||||||||||
Ratio of net investment income to average net assets: | ||||||||||||||||||||
Before expense waiver and/or reimbursement | 0.13 | % | 0.67 | % | 1.29 | % | 0.61 | % | 0.62 | % | ||||||||||
After expense waiver and/or reimbursement | 0.80 | % | 1.38 | % | 1.51 | % | 0.72 | % | 0.76 | % | ||||||||||
Portfolio turnover rate | 165 | % | 179 | % | 181 | % | 153 | % | 141 | % |
(1) | Net investment income per share represents net investment income divided by the average shares outstanding throughout the period. |
(2) | Net investment income per share is calculated using the ending balance of undistributed net investment income prior to considerations of adjustments for permanent book and tax differences. |
The accompanying notes are an integral part of these financial statements.
38
LKCM Funds |
Notes to the Financial Statements |
A. Organization and Significant Accounting Policies: LKCM Funds (the “Trust”) is registered under the Investment Company Act of 1940 (“1940 Act”) as an open-end, management investment company. The Trust was organized as a Delaware business trust on February 10, 1994 and consists of eight diversified series, five of which are presented herein and include the LKCM Small Cap Equity Fund, LKCM Equity Fund, LKCM Balanced Fund, LKCM Fixed Income Fund and LKCM International Fund (collectively, the “Funds”), the assets of which are invested in separate, independently managed portfolios. Investment operations of the Funds began on July 14, 1994 (LKCM Small Cap Equity Fund), January 3, 1996 (LKCM Equity Fund), and December 30, 1997 (LKCM Balanced Fund, LKCM Fixed Income Fund and LKCM International Fund). The Small Cap Equity Fund and the Equity Fund issued a second class of shares, Adviser Class Shares, and renamed the initial class as Institutional Class Shares on May 1, 2003. The Small Cap Equity Adviser Class Shares were initially sold on June 5, 2003 and are subject to expenses pursuant to the Rule 12b-1 plan described in Note B. The Equity Fund Adviser Class Shares have not yet commenced sales. Each Fund charges a 1% redemption fee for redemptions on Fund shares held for less than 30 days.
The LKCM Small Cap Equity Fund seeks to maximize long-term capital appreciation by investing primarily in equity securities of small companies (those with market capitalizations at the time of investment between $400 million and $2.5 billion) which Luther King Capital Management Corporation (the “Adviser”) believes are likely to have above-average growth in revenue and/or earnings and potential for above-average capital appreciation. The LKCM Equity Fund seeks to maximize long-term capital appreciation by investing primarily in equity securities of companies which the Adviser believes are likely to have above-average growth in revenue and/or earnings, above-average returns on shareholders’ equity and under-leveraged balance sheets, and potential for above-average capital appreciation. The LKCM Balanced Fund seeks to provide investors with current income and long-term capital appreciation by investing primarily in a portfolio of equity and fixed income securities. The LKCM Fixed Income Fund seeks to provide investors with current income by investing primarily in a portfolio of investment grade corporate and government fixed income securities. The LKCM International Fund seeks to provide investors with a total return in excess of the total return of the Morgan Stanley Capital International EAFE Index.
The following is a summary of significant accounting policies followed by the Funds in preparation of the financial statements.
1. Security Valuation: Securities listed on a U.S. securities exchange for which market quotations are readily available are valued at the last quoted sale price taken from the exchange where the security is primarily traded. Nasdaq National Market securities are valued at the Nasdaq Official Closing Price (“NOCP”). Unlisted U.S. securities and listed U.S. securities not traded on the valuation date for which market quotations are readily available are valued at the mean of the most recent quoted bid and asked price. Debt securities (other than obligations having a maturity of 60 days or less) are normally valued at the mean of the bid and ask price and/or by using a combination of daily quotes or matrix evaluations provided by an independent pricing service. Debt securities purchased with remaining maturities of 60 days or less are valued at amortized cost which approximates fair value. Other assets and securities for which no quotations are readily available (including restricted securities) are valued in good faith at fair value using methods determined by the Board of Trustees. The Board has adopted specific procedures for valuing portfolio securities and delegated the implementation of these procedures to the Adviser. The procedures authorize the Adviser to make all determinations regarding the fair value of a portfolio security and to report such determinations to the Board of Trustees. The Funds may also use independent pricing services to assist in pricing portfolio securities. The International Fund currently uses a third-party fair valuation vendor. The vendor provides a fair value for foreign securities held by the Fund based on certain factors and methodologies (involving, generally, tracking valuation correlations between the U.S. market and each non-U.S. security). Values from the fair value vendor are applied in the event that there is a movement in the U.S. market that exceeds a specific threshold that has been established by the Trustees. At December 31, 2010, the securities in the International Fund were not adjusted using factors provided by the fair value vendor.
Trading in securities on most foreign exchanges is normally completed before the close of the domestic market and may also take place on days when the domestic market is closed. Securities listed on a foreign exchange for which market quotations are readily available are valued at the last quoted sales price, unless events materially affecting the value of foreign securities occur between the time when the exchange on which they are traded closes and the time when the portfolio’s net asset value is calculated. If such events occur, foreign securities will be valued at fair value in accordance with procedures adopted by the Trustees.
The Trust has adopted accounting standards which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion of changes in valuation techniques and related inputs during the period. These standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Management has determined that these standards have no material impact on the Funds’ financial statements. The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability. These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own
39
assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized in the three broad levels listed below.
Level 1 - | Quoted unadjusted prices for identical instruments in active markets to which the Trust has access at the date of measurement. | |
Level 2 - | Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers. | |
Level 3 - | Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Trust’s own assumptions that market participants would use to price the asset or liability based on the best available information. |
In January 2010, FASB issued Accounting Standards Update No. 2010-06, Improving Disclosures about Fair Value Measurements (ASU 2010-06). ASU 2010-06 requires new disclosures regarding transfers in and out of Levels 1 and 2 (effective for interim and annual periods beginning after December 15, 2009), as well as additional details regarding Level 3 transaction activity (effective for interim and annual periods beginning after December 15, 2010). The Funds have disclosed the applicable requirements of this accounting standard in their financial statements.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the Funds’ investments as of December 31, 2010:
LKCM Small Cap Equity Fund | |||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Common Stocks | $ | 715,602,806 | $ | — | $ | — | $ | 715,602,806 | |||||||||
Money Market Funds | 18,476,482 | — | — | 18,476,482 | |||||||||||||
Total Investments** | $ | 734,079,288 | $ | — | $ | — | $ | 734,079,288 | |||||||||
LKCM Equity Fund | |||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Common Stocks | $ | 66,420,407 | $ | — | $ | — | $ | 66,420,407 | |||||||||
Money Market Funds | 5,845,681 | — | — | 5,845,681 | |||||||||||||
Total Investments** | $ | 72,266,088 | $ | — | $ | — | $ | 72,266,088 | |||||||||
LKCM Balanced Fund | |||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Common Stocks | $ | 11,770,422 | $ | — | $ | — | $ | 11,770,422 | |||||||||
Corporate Bonds | — | 4,408,317 | — | 4,408,317 | |||||||||||||
Money Market Funds | 264,736 | — | — | 264,736 | |||||||||||||
Total Investments** | $ | 12,035,158 | $ | 4,408,317 | $ | — | $ | 16,443,475 | |||||||||
LKCM Fixed Income Fund | |||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Preferred Stocks | $ | 840,800 | $ | — | $ | — | $ | 840,800 | |||||||||
Corporate Bonds | — | 147,137,617 | — | 147,137,617 | |||||||||||||
U.S. Government & Agency Issues | — | 8,412,574 | — | 8,412,574 | |||||||||||||
Money Market Funds | 3,161,543 | — | — | 3,161,543 | |||||||||||||
Total Investments** | $ | 4,002,343 | $ | 155,550,191 | $ | — | $ | 159,552,534 |
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LKCM International Fund | |||||||||||||||||||||
Other Financial | |||||||||||||||||||||
Instruments* | |||||||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | Level 2 | ||||||||||||||||
Common Stocks | $ | 333,343,775 | $ | 8,045 | $ | — | $ | 33,351,820 | $ | — | |||||||||||
Preferred Stocks | 1,660,399 | — | — | 1,660,399 | — | ||||||||||||||||
Warrants | — | 244,490 | — | 244,490 | — | ||||||||||||||||
Money Market Funds | 38,812 | — | — | 38,812 | — | ||||||||||||||||
Forward Currency Exchange Contracts | — | — | — | — | 147,660 | ||||||||||||||||
Total Investments** | $ | 335,042,986 | $ | 252,535 | $ | — | $ | 35,295,521 | $ | 147,660 | |||||||||||
Transfers into Level 1 | $ | 34,620,222 | |||||||||||||||||||
Transfers out of Level 2 | $ | (34,620,222 | ) | ||||||||||||||||||
Net transfers | — |
At December 31, 2009, the securities in the International Fund were adjusted using factors provided by the fair value vendor. The securities were not adjusted at December 31, 2010. There were no significant transfers into or out of Level 1, Level 2 or Level 3 fair value measurements during the reporting period for the other Funds, as compared to their classification from the previous annual report.
* | Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as futures, written options, forwards and swap contracts, which are valued at the unrealized appreciation (depreciation) on the instrument. |
** | Additional information regarding the industry and/or geographical classifications of these investments is disclosed in the Schedule of Investments. |
In March 2008, the Trust adopted an accounting standard involving disclosures of derivatives and hedging activities that is effective for fiscal years beginning after November 15, 2008. The standard is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivative instruments affect an entity’s results of operations and financial position. Other than the International Fund, the standard does not have any impact on the Funds’ financial disclosures because those Funds have not maintained any positions in derivative instruments or engaged in hedging activities during the year ended December 31, 2010. Additional information regarding derivative instruments and hedging activities of the International Fund is disclosed in the Schedule of Investments. Refer to Note A.6 to understand how and why the International Fund uses derivatives.
In preparing these financial statements, the Trust has evaluated events after December 31, 2010 and determined that there were no significant subsequent events that would require adjustment to or additional disclosure in these financial statements.
2. Federal Income Taxes: The Funds have elected to be treated as “regulated investment companies” under Subchapter M of the Internal Revenue Code and each Fund intends to distribute all of its investment company net taxable income and net capital gains to shareholders. Therefore, no federal income tax provision is recorded.
3. Distributions to Shareholders: The LKCM Small Cap Equity, LKCM Equity and LKCM International Funds generally intend to pay dividends and net capital gain distributions, if any, at least on an annual basis. The LKCM Balanced and LKCM Fixed Income Funds generally intend to pay dividends on a quarterly basis and net capital gain distributions, if any, at least on an annual basis.
4. Foreign Securities: Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in U.S. companies and securities of the U.S. government. These risks include devaluation of currencies and future adverse political and economic developments. Moreover, securities of many foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies and securities of the U.S. government.
5. Foreign Currency Translation: The books and records of the Funds are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the prevailing exchange rates, or at the mean of the current bid and asked prices, of such currencies against the U.S. dollar as quoted by a major bank, on the following basis:
1. Market value of investment securities and other assets and liabilities: at the rate of exchange at the valuation date.
2. Purchases and sales of investment securities, income and expenses: at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets of the Funds are presented at the foreign exchange rates and market values at the close of the periods, the Funds do not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held or sold during the year. Accordingly, such realized foreign currency gains (losses) are included in the reported net realized gains (losses) on investment transactions.
41
Reported realized foreign currency gains or losses arise from disposition of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes are recorded on the Funds’ books on the transaction date and the U.S. dollar equivalent of the amounts actually received or paid. Unrealized foreign exchange gains and losses arise from changes (due to the changes in the exchange rate) in the value of foreign currency and other assets and liabilities denominated in foreign currencies which are held at period end. At December 31, 2010, substantially all of the LKCM International Fund’s net assets consist of securities of issuers which are denominated in foreign currencies. Changes in currency exchange rates will affect the value of and investment income from such securities.
6. Forward Foreign Currency Exchange Contracts: The Funds may enter into forward foreign currency contracts (obligations to purchase or sell foreign currency in the future on a date and price fixed at the time the contracts are entered into) to manage the Fund’s exposure to foreign currency exchange fluctuations. Each day the forward contract is open, changes in the value of the contract are recognized as unrealized gains or losses by “marking to market”.
When the forward contract is closed, or the delivery of the currency is made or taken, the Funds record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract. The Funds are subject to off-balance sheet risk to the extent of changes in currency exchange rates. As of December 31, 2010, the International Fund had outstanding forward foreign currency contracts as shown just after the Schedule of Investments.
7. Expense Allocation: Expenses incurred by the Funds are allocated among the Funds based upon (i) relative average net assets, (ii) a specific identification basis as incurred, or (iii) evenly among the Funds, depending on the nature of the expense. Expenses that are directly attributable to a class of shares, such as Rule 12b-1 distribution fees, are charged to that class. For multi-class Funds, income, unrealized and realized gains/losses are generally allocated between the Fund’s classes in proportion to their respective net assets.
8. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
9. Guarantees and Indemnifications: In the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims against the Funds that have not yet occurred. Based on experience, the Funds expect the risk of loss to be remote.
10. Other: Security and shareholder transactions are recorded on the trade date. Realized gains and losses on sales of investments are calculated on the identified cost basis. Dividend income and dividends and distributions to shareholders are recorded on the ex-dividend date. Interest income is recognized on the accrual basis. All discounts and premiums are amortized on the effective interest method for tax and financial reporting purposes.
Generally accepted accounting principles require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. Accordingly, at December 31, 2010, reclassifications were recorded as follows.
LKCM | LKCM | LKCM | LKCM | LKCM | |||||||||||||||||
Small Cap | Equity | Balanced | Fixed | International | |||||||||||||||||
Equity Fund | Fund | Fund | Income Fund | Fund | |||||||||||||||||
Undistributed net investment | |||||||||||||||||||||
income (loss) | $ | 2,412,517 | $ | 3,776 | $ | 1,779 | $ | 18,716 | $ | 365,907 | |||||||||||
Accumulated gain (loss) | (59,363 | ) | (4,373 | ) | — | (18,716 | ) | (365,903 | ) | ||||||||||||
Paid in capital | (2,353,154 | ) | 597 | (1,779 | ) | — | (4 | ) |
11. Restricted and Illiquid Securities: The Funds are permitted to invest in securities that are subject to legal or contractual restrictions on resale or are illiquid. Restricted securities generally may be resold in transactions exempt from registration. A security may be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at the current valuation may be difficult.
B. Investment Advisory and Other Agreements: Luther King Capital Management Corporation (the “Adviser”) serves as the investment adviser to the Funds under an Investment Advisory Agreement (the “Agreement”). The Adviser receives a fee, computed daily and payable quarterly, at the annual rates presented below as applied to each Fund’s average daily net assets. The Adviser has entered into a Subadvisory Agreement with TT International (the “Sub-Adviser”) for the LKCM International Fund. Pursuant to its Subadvisory Agreement with the Adviser, the Sub-Adviser is entitled to receive a fee from the Adviser, calculated daily and payable quarterly, at the annual rate below as
42
applied to the LKCM International Fund’s average daily net assets. The Adviser has contractually agreed to waive all or a portion of its management fee and/or reimburse the Funds through April 30, 2011 in order to limit each Fund’s operating expenses to the annual cap rates presented below. For the year ended December 31, 2010, the Adviser and/or Sub-Adviser reimbursed the following expenses:
LKCM | LKCM | LKCM | LKCM | LKCM | |
Small Cap | Equity | Balanced | Fixed | International | |
Equity Fund | Fund | Fund | Income Fund | Fund | |
Annual Advisory Rate | 0.75% | 0.70% | 0.65% | 0.50% | 1.00%(1)(2) |
Annual Cap on Expenses | 1.00% (Inst.) | 0.80% | 0.80% | 0.65% | 1.20% |
1.25% (Adviser) | |||||
Expenses Reimbursed in 2010 | — | $137,617 | $64,824 | $120,803 | $254,640 |
(1) | The Adviser is entitled to receive a fee, calculated daily and payable quarterly, at the annual rate of 1.00% of the Fund’s average daily net assets. |
(2) | Pursuant to its Subadvisory Agreement with the Adviser, the Sub-Adviser is entitled to receive a fee from the Adviser, calculated daily and payable quarterly, at an annual rate of 0.50%, net of fee waivers. |
U.S. Bancorp Fund Services, LLC serves as transfer agent and administrator for the Trust and serves as accounting services agent for the Trust. U.S. Bank, N.A. serves as custodian for the Trust.
Distribution services are performed pursuant to a distribution contract with Quasar Distributors, LLC, the Trust’s principal underwriter.
The Small Cap Equity Fund and the Equity Fund have adopted a Rule 12b-1 plan under which the Adviser Class of each Fund may pay up to 1.00% of its average daily net assets for distribution and other services. However, the Board of Trustees has currently only authorized a fee of 0.25% of each Fund’s average daily net assets. For the year ended December 31, 2010, fees accrued by the Small Cap Equity Fund pursuant to the 12b-1 Plan were $96,428.
C. Fund Shares: At December 31, 2010, there was an unlimited number of shares of beneficial interest, no par value, authorized. The following table summarizes the activity in shares of each Fund:
Small Cap Equity Fund | ||||||||||||||||
Year Ended | Year Ended | |||||||||||||||
December 31, 2010 | December 31, 2009 | |||||||||||||||
Institutional Class | Institutional Class | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | 5,489,377 | $ | 98,476,894 | 7,874,772 | $ | 103,585,277 | ||||||||||
Shares redeemed | (6,092,221 | ) | (108,506,942 | ) | (6,595,759 | ) | (88,317,779 | ) | ||||||||
Redemption fee | 5,068 | 3,368 | ||||||||||||||
Net increase (decrease) | (602,844 | ) | $ | (10,024,980 | ) | 1,279,013 | $ | 15,270,866 | ||||||||
Shares Outstanding: | ||||||||||||||||
Beginning of period | 32,739,221 | 31,460,208 | ||||||||||||||
End of period | 32,136,377 | 32,739,221 | ||||||||||||||
Year Ended | Year Ended | |||||||||||||||
December 31, 2010 | December 31, 2009 | |||||||||||||||
Adviser Class | Adviser Class | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | 475,776 | $ | 8,259,757 | 495,524 | $ | 6,304,325 | ||||||||||
Shares redeemed | (630,622 | ) | (11,346,214 | ) | (311,944 | ) | (4,087,561 | ) | ||||||||
Redemption fee | 2 | — | ||||||||||||||
Net increase (decrease) | (154,846 | ) | $ | (3,086,455 | ) | 183,580 | $ | 2,216,764 | ||||||||
Shares Outstanding: | ||||||||||||||||
Beginning of period | 2,256,393 | 2,072,813 | ||||||||||||||
End of period | 2,101,547 | 2,256,393 | ||||||||||||||
Total Net Increase (Decrease) | $ | (13,111,435 | ) | $ | 17,487,630 |
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Equity Fund | ||||||||||||||||
Year Ended | Year Ended | |||||||||||||||
December 31, 2010 | December 31, 2009 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | 1,367,810 | $ | 18,874,012 | 557,583 | $ | 6,344,126 | ||||||||||
Shares issued to shareholders | ||||||||||||||||
in reinvestment of distributions | 46,790 | 711,682 | 28,510 | 374,616 | ||||||||||||
Shares redeemed | (422,222 | ) | (5,841,007 | ) | (359,031 | ) | (3,870,807 | ) | ||||||||
Redemption fee | 144 | 101 | ||||||||||||||
Net increase | 992,378 | $ | 13,744,831 | 227,062 | $ | 2,848,036 | ||||||||||
Shares Outstanding: | ||||||||||||||||
Beginning of period | 3,776,180 | 3,549,118 | ||||||||||||||
End of period | 4,768,558 | 3,776,180 | ||||||||||||||
Balanced Fund | ||||||||||||||||
Year Ended | Year Ended | |||||||||||||||
December 31, 2010 | December 31, 2009 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | 190,039 | $ | 2,590,842 | 148,180 | $ | 1,776,594 | ||||||||||
Shares issued to shareholders | ||||||||||||||||
in reinvestment of distributions | 14,372 | 192,811 | 17,747 | 208,152 | ||||||||||||
Shares redeemed | (76,967 | ) | (1,028,530 | ) | (72,194 | ) | (819,737 | ) | ||||||||
Net increase | 127,444 | $ | 1,755,123 | 93,733 | $ | 1,165,009 | ||||||||||
Shares Outstanding: | ||||||||||||||||
Beginning of period | 1,029,554 | 935,821 | ||||||||||||||
End of period | 1,156,998 | 1,029,554 | ||||||||||||||
Fixed Income Fund | ||||||||||||||||
Year Ended | Year Ended | |||||||||||||||
December 31, 2010 | December 31, 2009 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | 1,586,241 | $ | 17,619,726 | 3,118,416 | $ | 33,549,434 | ||||||||||
Shares issued to shareholders | ||||||||||||||||
in reinvestment of distributions | 498,201 | 5,506,025 | 439,421 | 4,692,146 | ||||||||||||
Shares redeemed | (1,129,134 | ) | (12,541,025 | ) | (1,630,375 | ) | (17,524,680 | ) | ||||||||
Redemption fee | 42 | 60 | ||||||||||||||
Net increase | 955,308 | $ | 10,584,768 | 1,927,462 | $ | 20,716,960 | ||||||||||
Shares Outstanding: | ||||||||||||||||
Beginning of period | 13,757,829 | 11,830,367 | ||||||||||||||
End of period | 14,713,137 | 13,757,829 | ||||||||||||||
International Fund | ||||||||||||||||
Year Ended | Year Ended | |||||||||||||||
December 31, 2010 | December 31, 2009 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | 98,566 | $ | 770,716 | 189,201 | $ | 1,336,110 | ||||||||||
Shares issued to shareholders | ||||||||||||||||
in reinvestment of distributions | 51,270 | 426,050 | 282,000 | 2,126,281 | ||||||||||||
Shares redeemed | (1,560,562 | ) | (12,003,105 | ) | (755,220 | ) | (4,470,892 | ) | ||||||||
Net decrease | (1,410,726 | ) | $ | (10,806,339 | ) | (284,019 | ) | $ | (1,008,501 | ) | ||||||
Shares Outstanding: | ||||||||||||||||
Beginning of period | 5,756,108 | 6,040,127 | ||||||||||||||
End of period | 4,345,382 | 5,756,108 |
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D. Security Transactions: Purchases and sales of investment securities, other than short-term investments, for the year ended December 31, 2010 were as follows:
Purchases | Sales | |||||||||||||||
U.S. | U.S. | |||||||||||||||
Government | Other | Government | Other | |||||||||||||
LKCM Small Cap Equity Fund | $ | — | $ | 337,330,286 | $ | — | $ | 358,890,624 | ||||||||
LKCM Equity Fund | — | 22,550,194 | — | 12,215,777 | ||||||||||||
LKCM Balanced Fund | — | 3,712,221 | 105,103 | 1,709,445 | ||||||||||||
LKCM Fixed Income Fund | 1,001,250 | 41,741,131 | 1,000,000 | 29,591,962 | ||||||||||||
LKCM International Fund | — | 60,917,348 | — | 71,917,354 |
E. Tax Information: At December 31, 2010, the components of accumulated earnings (losses) on a tax basis were as follows:
LKCM | LKCM | LKCM | LKCM | LKCM | ||||||||||||||||
Small Cap | Equity | Balanced | Fixed | International | ||||||||||||||||
Equity Fund | Fund | Fund | Income Fund | Fund | ||||||||||||||||
Cost of Investments | $ | 532,577,952 | $ | 56,407,078 | $ | 13,223,403 | $ | 151,103,062 | $ | 32,750,982 | ||||||||||
Gross Unrealized Appreciation | $ | 206,616,744 | $ | 17,266,239 | $ | 3,432,563 | $ | 8,771,388 | $ | 4,697,294 | ||||||||||
Gross Unrealized Depreciation | (5,115,408 | ) | (1,407,229 | ) | (212,491 | ) | (321,916 | ) | (2,152,755 | ) | ||||||||||
Net Unrealized Appreciation | $ | 201,501,336 | $ | 15,859,010 | $ | 3,220,072 | $ | 8,449,472 | $ | 2,544,539 | ||||||||||
Undistributed Ordinary Income | $ | — | $ | — | $ | — | $ | — | $ | 793,644 | ||||||||||
Undistributed Long-Term Capital Gain | — | 845,404 | — | 420,789 | — | |||||||||||||||
Total Distributable Earnings | $ | — | $ | 845,404 | $ | — | $ | 420,789 | $ | 793,644 | ||||||||||
Other Accumulated Losses | $ | (71,739,544 | ) | $ | — | $ | (475,164 | ) | $ | — | $ | (38,779,567 | ) | |||||||
Total Accumulated Gains (Losses) | $ | 129,761,792 | $ | 16,704,414 | $ | 2,744,908 | $ | 8,870,261 | $ | (35,441,384 | ) |
The difference between book-basis and tax-basis unrealized appreciation is attributable primarily to the tax deferral of losses on wash sales and partnerships.
At December 31, 2010, the accumulated capital loss carryforwards were as follows:
LKCM | LKCM | LKCM | ||||||||||
Small Cap | Balanced | International | ||||||||||
Equity Fund | Fund | Fund | ||||||||||
Expiring in 2016 | $ | — | $ | 2,359 | $ | 14,977,524 | ||||||
Expiring in 2017 | 71,739,544 | 472,805 | 22,376,424 | |||||||||
Expiring in 2018 | — | — | 906,012 | |||||||||
Total capital loss carryforwards | $ | 71,739,544 | $ | 475,164 | $ | 38,259,960 |
To the extent the Funds realize future net capital gains, taxable distributions will be reduced by any unused capital loss carryforwards as permitted by the Internal Revenue Code.
During the year ended December 31, 2010, the LKCM Small Cap Equity Fund, LKCM Equity Fund and LKCM Balanced Fund utilized capital loss carryforwards of $55,534,275, $1,349,608 and $241,576, respectively.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “RIC Act”) was enacted. The RIC Act modernizes several of the federal income and excise tax provisions related to regulated investment companies (“RICs”). Under the RIC Act, new capital losses may be carried forward indefinitely, with the character of the original loss retained. The RIC Act also contains simplification provisions, which are aimed at preventing disqualification of a RIC for inadvertent failures to comply with asset diversification and/or qualifying income tests. The RIC Act exempts RICs from the preferential dividend rule and repealed the 60-day designation requirement for certain types of pay-through income and gains. In addition, the RIC Act contains provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31. Except for the simplification provisions related to RIC qualification, the RIC Act is effective for taxable years beginning after December 22, 2010. Management is currently evaluating the implications of the RIC Act, if any, and the impact on the Funds’ financial statements is currently being assessed.
45
At December 31, 2010, the following Funds deferred, on a tax basis, post-October losses of:
LKCM |
International |
Fund |
$526,729 |
The tax components of dividends paid during the periods shown below were as follows:
Year Ended December 31, 2010 | Year Ended December 31, 2009 | |||||||||||||||
Ordinary | Long-Term | Ordinary | Long-Term | |||||||||||||
Income | Capital Gains | Income | Capital Gains | |||||||||||||
LKCM Small Cap Equity Fund | $ | — | $ | — | $ | — | $ | — | ||||||||
LKCM Equity Fund | 358,806 | 365,976 | 380,347 | — | ||||||||||||
LKCM Balanced Fund | 194,657 | — | 210,329 | — | ||||||||||||
LKCM Fixed Income Fund | 5,783,428 | 560,595 | 5,392,064 | 5,087 | ||||||||||||
LKCM International Fund | 474,770 | — | 2,454,865 | — |
The Funds designated as long-term capital gain dividend, pursuant to Internal Revenue Code Section 852(b)(3), the amount necessary to reduce the earnings and profits of the Funds related to net capital gain to zero for the tax years ended December 31, 2009 and 2010.
The Trust has adopted financial reporting rules regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The Trust has reviewed all open tax years and major jurisdictions and concluded that there is no impact on the Funds’ financial position or results of operations. Tax years that remain open to examination by major tax jurisdictions include tax years ended December 31, 2007 through December 31, 2010. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on tax returns as of December 31, 2010. The Funds are also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. If applicable, the Funds would recognize interest accrued related to unrecognized tax benefits in “interest expense” and penalties in “other expense” on the statement of operations.
46
Report of Independent Registered Public Accounting Firm |
To the Shareholders and Board of Trustees of LKCM Funds:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of LKCM Small Cap Equity Fund, LKCM Equity Fund, LKCM Balanced Fund, LKCM Fixed Income Fund, and LKCM International Fund, five of the portfolios constituting the LKCM Funds (collectively the “Funds”), as of December 31, 2010, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the year ended December 31, 2006 were audited by other auditors whose report, dated February 20, 2007, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the five portfolios (listed in the first paragraph) of the LKCM Funds as of December 31, 2010, and the results of their operations for the year then ended, the changes in their net assets for each of the two years then ended, and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Milwaukee, Wisconsin
February 28, 2011
47
LKCM Funds |
Additional Information |
December 31, 2010
Tax Information: The Funds designated the following percentages of dividends declared from net investment income for the fiscal year ended December 31, 2010 as qualified dividend income under the Jobs & Growth Tax Relief Reconciliation Act of 2003.
Equity | 100.00% | ||
Balanced | 80.21% | ||
Fixed Income | 0.66% | ||
International | 100.00% |
The Funds designated the following percentages of dividends declared during the fiscal year ended December 31, 2010 as dividends qualifying for the dividends received deduction available to corporate shareholders.
Equity | 100.00% | ||
Balanced | 72.53% | ||
Fixed Income | 0.66% |
Additional Information Applicable to Foreign Shareholders Only: The Funds hereby designate the following percentages of their ordinary income distributions for the fiscal year as interest-related dividends under Internal Revenue Code Section 871(k)(1)(C).
Equity | 0.20% | ||
Balanced | 49.57% | ||
Fixed Income | 98.61% | ||
International | 0.67% |
The Funds hereby designate the following percentages of their ordinary income distributions as short-term capital gain distributions under Internal Revenue Code Section 871(k)(2)(C) during the year ended December 31, 2010.
Equity | 0.00% | ||
Balanced | 0.00% | ||
Fixed Income | 1.64% | ||
International | 0.00% |
Availability of Proxy Voting Information: A description of the policies and procedures that the Funds use to determine how to vote proxies relating to their portfolio securities, as well as the proxy voting record, is available without charge, upon request, by calling toll-free 1-800-688-LKCM or on the SEC website at http://www.sec.gov.
The actual voting records relating to portfolio securities during the twelve month period ended June 30 (as filed with the SEC on Form N-PX) are available without charge, upon request, by calling the Funds toll free at 1-800-688-LKCM or by accessing the SEC’s website at www.sec.gov.
Availability of Quarterly Portfolio Schedule: The Funds’ are required to file complete schedules of portfolio holdings with the SEC for the first and third fiscal quarters on Form N-Q. Once filed, the Funds’ Form N-Q is available without charge upon request on the SEC’s website(http://www.sec.gov) and may be available by calling 1-800-688-LKCM. You can also obtain copies of Form N-Q by (i) visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330); (ii) sending your request and a duplicating fee to the SEC’s Public Reference Room, Washington, DC 20549; or (iii) sending your request electronically to publicinfosec.gov.
48
Information about the Funds’ Trustees:
The business and affairs of the Funds are managed under the direction of the Funds’ Board of Trustees. Information pertaining to the Trustees of the Funds is set forth below. The Statement of Additional Information includes additional information about the Funds’ Trustees and officers and is available, without charge, upon request by calling 1-800-688-LKCM.
Term of | Number of | ||||
Office & | Portfolios in | ||||
Position(s) | Length | Fund Complex | Other | ||
Name, Address | Held with | of Time | Principal Occupation | Overseen | Directorships |
and Age | the Trust | Served(1) | During Past Five Years | by Trustee | Held by Trustee |
Disinterested Trustees: | |||||
H. Kirk Downey | Chairman of | Since 2005 | President and CEO, Texas | 8 | Non-Executive Chairman |
301 Commerce Street | the Board | Systems, LLC and CEO, Texas | of the Board of AZZ | ||
Suite 1600 | of Trustees | learning systems LLC since 1999; | Incorporated, | ||
Fort Worth, TX 76102 | Dean, M.J. Neeley School of | a manufacturing | |||
Age: 68 | Trustee | Since 1994 | Business, Texas Christian University | company. | |
Business School from 1987 to 1999. | |||||
Earle A. Shields, Jr. | Trustee | Since 1994 | Consultant; formerly Consultant | 8 | Priests Pension Fund |
301 Commerce Street | for NASDAQ Corp. and Vice | of the Catholic Diocese | |||
Suite 1600 | President, Merrill Lynch & Co., Inc. | of Fort Worth, Lay | |||
Fort Worth, TX 76102 | Workers Pension Fund | ||||
Age: 90 | of the Catholic Diocese | ||||
of Fort Worth, St. Joseph | |||||
Health Care Trust, Catholic | |||||
Schools Trust and Catholic | |||||
Foundation of North Texas. | |||||
Richard J. Howell | Trustee | Since 2005 | CPA, Adjunct Faculty at SMU | 8 | Red Robin Gourmet |
301 Commerce Street | Cox School of Business from | Burgers, Inc. | |||
Suite 1600 | Chairman of | Since 2008 | 2004 to 2009; Consulting Services, | ||
Fort Worth, TX 76102 | the Audit and | since 2002; Audit Partner, Arthur | |||
Age: 68 | Compliance | Andersen LLP from 1974-2002. | |||
Committee | |||||
Interested Trustee: | |||||
J. Luther King, Jr.(2) | Trustee, | Since 1994 | Chairman, President and Director, | 8 | Employee Retirement |
301 Commerce Street | President and | Luther King Capital Management | Systems of Texas, 4K | ||
Suite 1600 | Chief Executive | Corporation since 1979. | Land & Cattle Company | ||
Fort Worth, TX 76102 | Officer | (ranching), Hunt Forest | |||
Age: 70 | Products (lumber), | ||||
Southwestern Exposition & | |||||
Livestock (livestock), | |||||
Southwest JLK | |||||
Corporation (management | |||||
company), Texas Christian | |||||
University, Texas | |||||
Southwestern Cattleraisers | |||||
Foundation (livestock) and | |||||
Tyler Technologies | |||||
(information management | |||||
company for government | |||||
agencies). |
(1) Each Trustee holds office during the lifetime of the Trust until that individual resigns, retires or is otherwise removed or replaced.
(2) Mr. King is an “interested person” of the Trust (as defined in the 1940 Act) because of his affiliation with the Adviser.
49
Term of | |||
Office & | |||
Position(s) | Length | ||
Name, Address | Held with | of Time | Principal Occupation |
and Age | the Trust | Served(1) | During Past Five Years |
Officers: | |||
J. Luther King, Jr. | President and | Since | Chairman, President and Director, Luther King Capital Management |
301 Commerce Street | Chief Executive | 1994 | Corporation since 1979. |
Suite 1600 | Officer | ||
Fort Worth, TX 76102 | |||
Age: 70 | |||
Paul W. Greenwell | Vice President | Since | Principal, Luther King Capital Management since 1986, |
301 Commerce Street | 1996 | Vice President and Portfolio Manager, Luther King Capital | |
Suite 1600 | Management since 1983. | ||
Fort Worth, TX 76102 | |||
Age: 60 | |||
Richard Lenart | Secretary and | Since | Luther King Capital Management since 2005. |
301 Commerce Street | Treasurer | 2006 | |
Suite 1600 | |||
Fort Worth, TX 76102 | |||
Age: 44 | |||
Steven R. Purvis | Vice President | Since | Principal, Luther King Capital Management since 2003, |
301 Commerce Street | 2000 | Vice President and Portfolio Manager, Luther King Capital | |
Suite 1600 | Management since 1996. | ||
Fort Worth, TX 76102 | |||
Age: 45 | |||
Jacob D. Smith | Chief | Since | Chief Financial Officer since 2010, General Counsel and Chief |
301 Commerce Street | Financial | 2010 | Compliance Officer, Luther King Capital Management since 2006, |
Suite 1600 | Officer | Enforcement Attorney, U.S. Securities and Exchange Commission | |
Fort Worth, TX 76102 | from 2005 to 2006. | ||
Age: 36 | Chief | Since | |
Compliance | 2006 | ||
Officer |
50
LKCM FUNDS
PRIVACY NOTICE
Our Commitment to Your Privacy
At LKCM Funds, we are committed to safeguarding the confidentiality and privacy of personal information about our shareholders. This privacy notice describes the policies and procedures we have implemented to protect the privacy of your personal information as well as the sources through which we may obtain personal information about you.
How We Protect Your Personal Information
Protecting your personal information is an important priority at LKCM Funds. Accordingly, we have implemented policies and procedures designed to safeguard your personal information from unauthorized access. Pursuant to these policies and procedures, we maintain various physical, electronic, and procedural safeguards to protect the security and confidentiality of your personal information, and we adapt these safeguards to respond to evolving technological and other standards.
In addition, we do not disclose any nonpublic personal information about you to nonaffiliated third parties, except as required or permitted by law or as necessary for us to carry out our responsibilities in providing services to you.
How We Obtain Your Personal Information
We collect nonpublic personal information about you from the following sources:
• Information provided by you or your representatives, whether through documentation that you or your representatives provide to us, through discussions that you or your representatives have with us, or otherwise; and
• Information arising from your account experience with us.
Please do not hesitate to contact our Chief Compliance Officer if you have any questions regarding the measures we have implemented to protect the privacy of your personal information.
Not a Part of the Annual Report.
U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
LKCM FUNDS
P.O. Box 701
Milwaukee, WI 53201-0701
Officers and Trustees | |||
J. Luther King, Jr., CFA | H. Kirk Downey | Richard Lenart | |
Trustee, | Chairman of the Board | Secretary & Treasurer | |
President | |||
Paul W. Greenwell | Richard J. Howell | Jacob D. Smith | |
Vice President | Trustee | Chief Financial Officer | |
Chief Compliance Officer | |||
Steven R. Purvis, CFA | Earle A. Shields, Jr. | ||
Vice President | Trustee | ||
Investment Adviser | |||
Luther King Capital Management Corporation | |||
301 Commerce Street, Suite 1600 | |||
Fort Worth, TX 76102 | |||
Administrator, Transfer Agent, Dividend | |||
Paying Agent & Shareholder Servicing Agent | |||
U.S. Bancorp Fund Services, LLC | |||
P.O. Box 701 | |||
Milwaukee, WI 53201-0701 | |||
Custodian | |||
U.S. Bank, N.A. | |||
1555 N. River Center Drive, Suite 302 | |||
Milwaukee, WI 53212 | |||
Independent Registered Public Accounting Firm | |||
Deloitte & Touche LLP | |||
555 E. Wells St., Suite 1400 | |||
Milwaukee, WI 53202 | |||
Distributor | |||
Quasar Distributors, LLC | |||
615 E. Michigan Street | |||
Milwaukee, WI 53202 |
LKCM Aquinas Value Fund
LKCM Aquinas Growth Fund
LKCM Aquinas Small Cap Fund
Annual Report
December 31, 2010
Dear Fellow Shareholders:
We report the following performance information for the LKCM Aquinas Funds:
Five Year | |||||||
One Year | Average | Avg. Annual | |||||
Net | Gross | Total Return | Annualized | Total Return | |||
Inception | NAV @ | Expense | Expense | Ended | Return Ended | Since | |
Funds | Dates | 12/31/10 | Ratio*,** | Ratio** | 12/31/10 | 12/31/10 | Incept.*** |
LKCM Aquinas Value Fund | 7/11/05 | $12.68 | 1.50% | 1.66% | 17.25% | 4.22% | 4.33% |
Russell 1000 Value Index(1) | 15.51% | 1.28% | 1.80% | ||||
LKCM Aquinas Growth Fund | 7/11/05 | $16.61 | 1.50% | 1.67% | 16.56% | 2.68% | 2.92% |
Russell 1000 Growth Index(2) | 16.71% | 3.75% | 4.33% | ||||
LKCM Aquinas Small Cap Fund | 7/11/05 | $ 7.07 | 1.50% | 3.69% | 34.67% | 4.36% | 4.67% |
Russell 2000 Index(3) | 26.85% | 4.47% | 4.50% |
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-423-6369. The Funds impose a 1.00% redemption fee on shares held less than 30 days. If reflected, the fee would reduce performance shown.
* | Excludes acquired fund fees and expenses. The Adviser has contractually agreed to waive all or a portion of its management fee and/or reimburse the Funds to maintain designated expense ratios through April 30, 2011. Investment performance reflects fee waivers, if any, in effect. In the absence of such waivers, total return would be reduced. Investment performance is based upon the net expense ratio. |
** | Expense ratios above are as of December 31, 2009, the Funds’ prior fiscal year end, as reported in the Funds’ most recent prospectus. Expense ratios reported for other periods in the financial highlights of this report may differ. |
*** | On July 11, 2005, the Aquinas Funds merged into the LKCM Aquinas Funds. Due to the change in adviser and investment technique, performance is being quoted for the period after the merger. |
(1) | The Russell 1000 Value Index is an unmanaged index which measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. |
(2) | The Russell 1000 Growth Index is an unmanaged index which measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. |
(3) | The Russell 2000 Index is an unmanaged index which measures the performance of the 2000 smallest companies in the Russell 3000 Index. |
Note: These indices defined above are not available for direct investment.
Catholic Values Investing
The LKCM Aquinas Funds practice socially responsible investing within the framework provided by the United States Conference of Catholic Bishop’s (USCCB’s) Socially Responsible Investing Guidelines. The LKCM Aquinas Funds follow these guidelines by using an approach that focuses on Catholic values screening of portfolio companies, proactive dialogue with those companies whose practices conflict with the guidelines, and potential exclusion of those companies that are unwilling to alter their practices over a reasonable period of time. We exclude a number of companies from possible investment that do not meet our standards for Catholic values investing. We monitor portfolio companies selected for the LKCM Aquinas Funds for policies on various issues set out in the USCCB guidelines. If investments are made in companies whose policies are inconsistent with the USCCB guidelines, we may attempt to influence the company’s policies through proactive dialogue and other efforts.
Economic Review and Outlook
Government was a common thread throughout 2010, particularly the issue of public sector solvency. In Europe, Greece and Ireland required the support of a European Union bailout fund. The cost of issuing debt rose sharply not only for Greece and Ireland, but also for Portugal and Spain. Domestically, states have resorted to dramatic measures to fill budget gaps. The mismatch between revenue inflows and government outlays provides challenges at every level of government, including municipalities caught short of revenue due to falling property values. We believe debt will continue to grow in importance in the national psyche as solutions are sought to mitigate deficit spending, and the federal deficit will likely be a hallmark issue of the 2012 Presidential race.
The Federal Reserve also found itself in the spotlight this year as some policymakers questioned the Fed’s need for independence, while others questioned the rationale of its dual mandate of price stability and maximum employment. Similar to the first round of quantitative easing, the Fed heavily conditioned the market through a series of speeches by Fed officials, including one by Chairman Bernanke in August. By the time the Fed formally announced the second round of quantitative easing, the treasury market had fully discounted the Fed’s announcement. Treasuries immediately began to sell-off, particularly in the five-year portion of the treasury yield curve where the Fed was expected to be most active.
2
In recent history, the combination of monetary stimulus through Fed interest rate cuts and fiscal stimulus through lower taxes and deficit spending has been the financial prescription to broadly stimulate the economy. While deficit spending and taxes will remain in the spotlight, it is monetary policy which is charting a new course. As a result of the second advent of quantitative easing, the U.S. dollar declined slightly in the fourth quarter. The Fed is essentially engineering lower interest rates at a time when many of the world’s central banks are raising rates, or at a minimum maintaining constant interest rates.
The European Union, and specifically the European Central Bank, faced significant challenges in 2010 as it maneuvered to hold the monetary union together through its first significant test as Greece, Portugal, Spain and Ireland struggled with the issuance of sovereign debt. In response, the European Central Bank has been buying sovereign debt and providing liquidity for European banks. We believe what is occurring in Europe is a similar refrain to what transpired in the U.S. mortgage market. Just as the weaker subprime mortgages showed stress first, leading to a series of debt and liquidity problems for stronger institutions, the weaker European Union countries are creating a series of challenges.
The U.S. economy grew at an accelerating rate throughout 2010, with year-over-year real Gross Domestic Product (GDP) growth of 2.4% in the first quarter, 3.0% in the second quarter, 3.2% in the third quarter, and 5.7% in the fourth quarter. Domestic inflation, as measured by the annual change in the Consumer Price Index, declined from a reading of 2.6% in January of 2010 to 1.5% in December of 2010. While it is our view that inflation is not currently a front-burner issue, there is early evidence suggesting an inflationary environment could eventually take hold. For example, the money supply, as measured by the three month moving average of M2, has been growing at a 7% annualized rate. Despite the strong growth in money supply, the velocity of money, or the rate at which each dollar changes hands, continued to decline. If the velocity of money reverses course due to stronger demand for credit by businesses and consumer confidence, we believe the environment would be ripe for inflation, given the growth in money supply and other indications such as the narrowing output gap.
Despite the relatively low Consumer Price Index readings, companies with significant commodity exposure have been exposed to input pricing pressure as emerging market demand remains robust for commodities. The sharp rise in commodity prices in 2010 poses an interesting situation. Over the past 30 years, each Fed easing cycle was accompanied by a decline in commodity prices. The current easing cycle, however, is unfolding against a global demand for goods. The impact of this global demand for raw materials and the general cyclical rebound in the U.S. economy were visible in the sector performance of the S&P 500 Index in 2010, with the Consumer Discretionary, Industrials, Materials and Energy sectors outperforming the S&P 500 Index.
Both the equity market and economy exited 2010 with a good deal of momentum. On the economic front, we believe that the Fed remained extremely accommodative, Washington D.C. appeared committed to further stimulus, inflation appeared low, initial jobless claims data continued to broadly improve, and leading economic indicators improved. We believe the equity market is similarly backed by solid corporate profit growth and reasonable valuations by historical standards, and that corporations will likely transition from capital preservation to capital deployment in the form of hiring, equipment purchases, higher dividends and share buybacks.
In our view, the key economic shift in 2011 should be the transition from the current economic recovery driven by significant stimulus and near-zero interest rates to a self-sustaining expansion. In order for this transition to be successful, we believe real GDP must rebound sufficiently to validate expectations of a sustainable recovery, while not recovering at such a rate to cause the Fed to prematurely tighten monetary policy. Central in the shift to sustainable economic growth is consumer spending, which is largely dependent on employment and consumer confidence.
Although the unemployment rate is likely to remain stubbornly high throughout 2011, directionally the employment picture will have to improve in order for real GDP to grow at the 3% pace that we believe is likely for 2011. The dramatic reduction in labor costs during the recent recession helped to propel corporate profit margins back to near peak levels. If labor costs rise with the rebound in employment, we believe it will have the effect of weighing on corporate profit margins; however, this should be outweighed in the broader GDP equation by sustained consumer spending.
During 2010, a key driver of the equity market was better than expected corporate earnings. Corporate profit margins have rebounded significantly, resulting in approximately 28% growth in S&P 500 Index profits in 2010. The financial sector generated approximately half of this growth, as many banks returned to profitability in 2010. Therefore, we believe the 15.1% return of the S&P 500 Index for 2010 was essentially in-line with the 14% earnings growth that the S&P 500 Index experienced outside the financial sector, implying that there was almost no price-to-earnings multiple expansion in 2010. In our view, the driver of market returns in 2011 is again likely to be corporate earnings growth with only modest price-to-earnings multiple expansion.
We believe global economic news is likely to contribute heavily to headlines again in 2011; in particular, China’s challenge of balancing an economy growing approximately 9.6% year-over-year with the inflationary pressures they are experiencing. As noted earlier, the People’s Bank of China recently tightened interest rates in an attempt to reduce inflation. China is one of several countries which openly criticized the Fed’s second round of quantitative easing which has the effect of importing inflation into China via a weaker dollar and higher commodity prices. A significant economic policy mistake in China would likely produce a global shockwave and warrants close attention.
3
While historical market performance is no guarantee of future results, as we enter 2011, investors clearly have history on their side. This year marks both the third year of an economic expansion and of a presidential cycle. There have only been five such occurrences in the past 111 years of Dow Jones Industrial Average history. The average return of the Dow Jones Industrial Average over these five time periods was approximately 20.6%, with the lowest return being zero in 1947, which also had the distinction of being the second year of a bear market which began in May of 1946. The Presidential cycle alone is historically significant with the market rising approximately 81% of the time in the third year of a Presidential term over the past 111 years.
LKCM Aquinas Small Cap Fund
The LKCM Aquinas Small Cap Fund outperformed the Russell 2000 Index during the twelve months ended December 31, 2010. Security selection within the Information Technology, Consumer Discretionary, Industrials and Energy sectors provided the most meaningful contribution to the Fund’s outperformance. The Fund’s performance also benefited from its underweight position in the Financials sector and overweight position in the Energy sector. Stock selection within the Financials and Materials sectors detracted from performance. We continue to believe the Fund is positioned with a strong emphasis on high quality companies with internal growth prospects that should experience solid improvement from the anticipated economic expansion. We believe investments in these types of companies can continue to add value for the Fund and its shareholders.
Total Return | |||
Year Ended | |||
December 31, 2010 | |||
LKCM Aquinas Small Cap Fund | 34.67% | ||
Russell 2000 Index | 26.85% |
LKCM Aquinas Growth Fund
The LKCM Aquinas Growth Fund performed in line with its benchmark, the Russell 1000 Growth Index, during the year ended December 31, 2010. The Fund’s performance benefited from stock selection in the Information Technology, Consumer Discretionary and Energy sectors. The Fund’s performance was also enhanced by an overweight allocation in the Industrials sector and an underweight allocation in the Healthcare sector. Stock selection in the Consumer Staples sector pressured returns for the period. We believe the Fund is well positioned in companies with good growth prospects for the anticipated continued worldwide economic recovery.
Total Return | |||
Year Ended | |||
December 31, 2010 | |||
LKCM Aquinas Growth Fund | 16.56% | ||
Russell 1000 Growth Index | 16.71% |
LKCM Aquinas Value Fund
The LKCM Aquinas Value Fund outperformed its benchmark, the Russell 1000 Value Index, during the year ended December 31, 2010. The Fund’s performance benefited from overweight positions in the Consumer Discretionary and Energy sectors as well as underweight positions in the Consumer Staples and Healthcare sectors. Stock selection in the Information Technology and Healthcare sectors also enhanced the Fund’s performance. Stock selection in the Financials and Consumer Staples sectors detracted from the Fund’s performance. The Fund’s performance during the year relative to the benchmark continued to provide us with confidence in our investment strategy for the Fund.
Total Return | |||
Year Ended | |||
December 31, 2010 | |||
LKCM Aquinas Value Fund | 17.25% | ||
Russell 1000 Value Index | 15.51% |
J. Luther King, Jr., CFA
February 4, 2011
The information provided herein represents the opinion of J. Luther King, Jr. and is not intended to be a forecast of future events, a guarantee of future results, nor investment advice.
4
Please refer to the Schedule of Investments found on pages 11-16 of the report for more information on Fund holdings. Fund holdings and sector allocations are subject to change and are not recommendations to buy or sell any securities.
Mutual fund investing involves risk. Principal loss is possible. Past performance is not a guarantee of future results. Small and medium capitalization funds typically carry additional risks, since smaller companies generally have a higher risk of failure, and, historically, their stocks have experienced a greater degree of market volatility than stocks on average. Since the Fund practices socially responsible investing within the framework provided by the United States Conference of Catholic Bishop’s guidelines, the Fund may forego a profitable investment opportunity or sell a security when it may be disadvantageous to do so.
Current and future portfolio holdings are subject to risk.
The S&P 500 Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. The Dow Jones Industrial Average is a price weighted average of 30 actively traded shares of U.S. industrial corporations listed on the New York Stock Exchange. You cannot invest directly in an index.
Earnings growth is a key indicator for measuring a company’s success and can be a driving force behind stock price appreciation. Put simply, earnings growth is the percentage gain in net income over time.
Earnings multiple: The earnings multiple of a stock, also called the price/earnings (P/E) ratio, is the share price divided by the earnings per share. The earnings multiple is often based on the prior twelve months of earnings data.
Must be preceded or accompanied by a prospectus.
Quasar Distributors, LLC, distributor.
5
PERFORMANCE:
The following information illustrates the historical performance of LKCM Aquinas Value Fund as of December 31, 2010 compared to the Fund’s representative market indices.
Performance data quoted represents past performance; past performance does not guarantee future results. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-423-6369.
An index is an unmanaged portfolio and does not trade or incur any expenses. One can not invest in an unmanaged index.
AVERAGE ANNUAL TOTAL RETURN | ||||
Past | Past | Past | Since | |
1 Year | 3 Years | 5 Years | Inception(1) | |
LKCM Aquinas Value Fund | 17.25% | (0.79)% | 4.22% | 4.33% |
Russell 1000 Value Index | 15.51% | (4.42)% | 1.28% | 1.80% |
Lipper Large-Cap Value Funds Index | 13.02% | (3.82)% | 1.52% | 2.42% |
(1) | The assets of the Aquinas Value Fund were acquired by the LKCM Aquinas Value Fund on July 11, 2005. At the time of the reorganization, the Adviser also changed from Aquinas Investment Advisers, Inc. to Luther King Capital Management Corporation. |
A HYPOTHETICAL $10,000 INVESTMENT IN LKCM AQUINAS VALUE FUND
(for the period from July 11, 2005 through December 31, 2010)
The Russell 1000 Value Index is an unmanaged index consisting of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
The Lipper Large-Cap Value Funds Index is an index of large cap value mutual funds tracked by Lipper, Inc.
6
PERFORMANCE:
The following information illustrates the historical performance of LKCM Aquinas Growth Fund as of December 31, 2010 compared to the Fund’s representative market indices.
Performance data quoted represents past performance; past performance does not guarantee future results. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-423-6369.
An index is an unmanaged portfolio and does not trade or incur any expenses. One can not invest in an unmanaged index.
AVERAGE ANNUAL TOTAL RETURN | ||||
Past | Past | Past | Since | |
1 Year | 3 Years | 5 Years | Inception(1) | |
LKCM Aquinas Growth Fund | 16.56% | 0.48% | 2.68% | 2.92% |
Russell 1000 Growth Index | 16.71% | (0.47)% | 3.75% | 4.33% |
Lipper Large-Cap Growth Funds Index | 15.13% | (2.23)% | 2.38% | 3.79% |
(1) | The assets of the Aquinas Growth Fund were acquired by the LKCM Aquinas Growth Fund on July 11, 2005. At the time of the reorganization, the Adviser also changed from Aquinas Investment Advisers, Inc. to Luther King Capital Management Corporation. |
A HYPOTHETICAL $10,000 INVESTMENT IN LKCM AQUINAS GROWTH FUND
(for the period from July 11, 2005 through December 31, 2010)
The Russell 1000 Growth Index consists of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.
The Lipper Large-Cap Growth Funds Index is an index of large cap growth mutual funds tracked by Lipper, Inc.
7
PERFORMANCE:
The following information illustrates the historical performance of LKCM Aquinas Small Cap Fund as of December 31, 2010 compared to the Fund’s representative market indices.
Performance data quoted represents past performance; past performance does not guarantee future results. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-423-6369.
An index is an unmanaged portfolio and does not trade or incur any expenses. One can not invest in an unmanaged index.
AVERAGE ANNUAL TOTAL RETURN | ||||
Past | Past | Past | Since | |
1 Year | 3 Years | 5 Years | Inception(1) | |
LKCM Aquinas Small Cap Fund | 34.67% | 3.04% | 4.36% | 4.67% |
Russell 2000 Index | 26.85% | 2.22% | 4.47% | 4.50% |
Lipper Small-Cap Core Funds Index | 25.71% | 2.88% | 4.76% | 5.76% |
(1) | The assets of the Aquinas Small-Cap Fund were acquired by the LKCM Aquinas Small Cap Fund on July 11, 2005. At the time of the reorganization, the Adviser also changed from Aquinas Investment Advisers, Inc. to Luther King Capital Management Corporation. |
A HYPOTHETICAL $10,000 INVESTMENT IN LKCM AQUINAS SMALL CAP FUND
(for the period from July 11, 2005 through December 31, 2010)
The Russell 2000 Index is an unmanaged index consisting of the 2,000 smallest companies in the Russell 3000 Index.
The Lipper Small-Cap Core Funds Index is an index of small cap core mutual funds tracked by Lipper, Inc.
8
LKCM Aquinas Funds Expense Example — December 31, 2010
As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including redemption fees; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (7/1/10-12/31/10).
ACTUAL EXPENSES
The first line of the tables below provides information about actual account values and actual expenses. Although the Funds charge no sales load, you will be assessed fees for outgoing wire transfers, returned checks and stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Funds’ transfer agent. If you request that a redemption be made by wire transfer, currently a $15 fee is charged by the Funds’ transfer agent. You will be charged a redemption fee equal to 1.00% of the net amount of the redemption if you redeem your shares of the LKCM Aquinas Value, Aquinas Growth and Aquinas Small Cap Funds within 30 days of purchase. To the extent the Funds invest in shares of other investment companies as part of its investment strategy, you will indirectly bear your proportionate share of any fees and expenses charged by the underlying funds in which the Funds invest in addition to the expenses of the Funds. Actual expenses of the underlying funds are expected to vary among the various underlying funds. These expenses are not included in the example below. The example below includes management fees, registration fees and other expenses. However, the example below does not include portfolio trading commissions and related expenses and other extraordinary expenses as determined under generally accepted accounting principles. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLES FOR COMPARISON PURPOSES
The second line of the tables below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which are not the Funds’ actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactions costs were included, your costs would have been higher.
LKCM Aquinas Value Fund | |||||
Beginning | Ending | Expenses Paid | |||
Account Value | Account Value | During Period* | |||
7/1/10 | 12/31/10 | 7/1/10 – 12/31/10 | |||
Actual | $1,000.00 | $1,262.30 | $8.55 | ||
Hypothetical (5% return before expense) | $1,000.00 | $1,017.64 | $7.63 |
* | Expenses are equal to the Fund’s annualized net expense ratio of 1.50%, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. |
LKCM Aquinas Growth Fund | |||||
Beginning | Ending | Expenses Paid | |||
Account Value | Account Value | During Period* | |||
7/1/10 | 12/31/10 | 7/1/10 – 12/31/10 | |||
Actual | $1,000.00 | $1,270.80 | $8.59 | ||
Hypothetical (5% return before expense) | $1,000.00 | $1,017.64 | $7.63 |
* | Expenses are equal to the Fund’s annualized net expense ratio of 1.50%, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. |
9
LKCM Aquinas Small Cap Fund | |||||
Beginning | Ending | Expenses Paid | |||
Account Value | Account Value | During Period* | |||
7/1/10 | 12/31/10 | 7/1/10 – 12/31/10 | |||
Actual | $1,000.00 | $1,362.20 | $8.93 | ||
Hypothetical (5% return before expense) | $1,000.00 | $1,017.64 | $7.63 |
* | Expenses are equal to the Fund’s annualized net expense ratio of 1.50%, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. |
ALLOCATION OF PORTFOLIO HOLDINGS — LKCM Aquinas Funds — December 31, 2010
Percentages represent market value as a percentage of total investments.
LKCM Aquinas Value Fund | LKCM Aquinas Growth Fund |
LKCM Aquinas Small Cap Fund | |
10
LKCM Aquinas Value Fund |
Schedule of Investments |
December 31, 2010
COMMON STOCKS - 98.3% | Shares | Value | |||||||
Aerospace & Defense - 1.7% | |||||||||
Honeywell International Inc. | 12,000 | $ | 637,920 | ||||||
Air Freight & Logistics - 1.8% | |||||||||
C.H. Robinson Worldwide, Inc. | 8,500 | 681,615 | |||||||
Auto Components - 2.4% | |||||||||
LKQ Corporation (a) | 40,000 | 908,800 | |||||||
Beverages - 2.6% | |||||||||
The Coca-Cola Company | 10,000 | 657,700 | |||||||
PepsiCo, Inc. | 5,000 | 326,650 | |||||||
984,350 | |||||||||
Building Products - 0.9% | |||||||||
Masco Corporation | 27,500 | 348,150 | |||||||
Capital Markets - 2.6% | |||||||||
Lazard Ltd. - Class A (b) | 25,000 | 987,250 | |||||||
Chemicals - 4.5% | |||||||||
FMC Corporation | 10,000 | 798,900 | |||||||
Monsanto Company | 9,000 | 626,760 | |||||||
Praxair, Inc. | 3,000 | 286,410 | |||||||
1,712,070 | |||||||||
Commercial Banks - 5.2% | |||||||||
BOK Financial Corporation | 20,000 | 1,068,000 | |||||||
Wells Fargo & Company | 30,000 | 929,700 | |||||||
1,997,700 | |||||||||
Commercial Services & Supplies - 3.8% | |||||||||
Waste Management, Inc. | 20,000 | 737,400 | |||||||
Western Union Company | 40,000 | 742,800 | |||||||
1,480,200 | |||||||||
Communications Equipment - 1.3% | |||||||||
Cisco Systems, Inc. (a) | 25,000 | 505,750 | |||||||
Computers & Peripherals - 5.1% | |||||||||
Brocade Communications Systems, Inc. (a) | 85,000 | 449,650 | |||||||
EMC Corporation (a) | 40,000 | 916,000 | |||||||
International Business Machines Corporation | 4,020 | 589,975 | |||||||
1,955,625 | |||||||||
Diversified Financial Services - 2.2% | |||||||||
JPMorgan Chase & Co. | 20,000 | 848,400 | |||||||
Diversified Telecommunication Services - 3.1% | |||||||||
AT&T Inc. | 25,000 | 734,500 | |||||||
Verizon Communications Inc. | 12,500 | 447,250 | |||||||
1,181,750 | |||||||||
Electrical Equipment - 3.3% | |||||||||
Emerson Electric Co. | 8,000 | 457,360 | |||||||
Roper Industries, Inc. | 10,400 | 794,872 | |||||||
1,252,232 | |||||||||
Electronic Equipment & Instruments - 1.7% | |||||||||
National Instruments Corporation | 17,500 | 658,700 | |||||||
Energy Equipment & Services - 5.8% | |||||||||
Nabors Industries Ltd. (a) (b) | 6,800 | 159,528 | |||||||
National Oilwell Varco Inc. | 15,000 | 1,008,750 | |||||||
Noble Corporation (b) | 10,000 | 357,700 | |||||||
Schlumberger Limited (b) | 8,400 | 701,400 | |||||||
2,227,378 | |||||||||
Food & Staples Retailing - 3.0% | |||||||||
CVS Caremark Corporation | 15,000 | 521,550 | |||||||
The Kroger Co. | 27,500 | 614,900 | |||||||
1,136,450 | |||||||||
Health Care Equipment & Supplies - 4.5% | |||||||||
Covidien plc (b) | 12,500 | 570,750 | |||||||
DENTSPLY International Inc. | 17,500 | 597,975 | |||||||
Thermo Fisher Scientific, Inc. (a) | 10,000 | 553,600 | |||||||
1,722,325 | |||||||||
Insurance - 2.3% | |||||||||
HCC Insurance Holdings, Inc. | 30,000 | 868,200 | |||||||
Internet Software & Services - 1.6% | |||||||||
Expedia, Inc. | 25,000 | 627,250 | |||||||
IT Services - 1.3% | |||||||||
Accenture plc - Class A (b) | 10,000 | 484,900 | |||||||
Life Sciences Tools & Services - 1.8% | |||||||||
PerkinElmer, Inc. | 27,500 | 710,050 | |||||||
Machinery - 1.8% | |||||||||
Danaher Corporation | 15,000 | 707,550 | |||||||
Media - 1.9% | |||||||||
Cinemark Holdings, Inc. | 42,500 | 732,700 | |||||||
Metals & Mining - 2.1% | |||||||||
Peabody Energy Corporation | 12,500 | 799,750 | |||||||
Multiline Retail - 1.5% | |||||||||
Kohl’s Corporation (a) | 11,000 | 597,740 | |||||||
Multi-Utilities & Unregulated Power - 1.3% | |||||||||
Duke Energy Corporation | 29,000 | 516,490 | |||||||
Oil & Gas Exploration & | |||||||||
Production Companies - 10.0% | |||||||||
Cabot Oil & Gas Corporation | 10,000 | 378,500 | |||||||
ConocoPhillips | 6,000 | 408,600 | |||||||
Denbury Resources Inc. (a) | 35,000 | 668,150 | |||||||
EXCO Resources, Inc. | 37,500 | 728,250 | |||||||
Exxon Mobil Corporation | 4,000 | 292,480 | |||||||
SM Energy Company | 12,500 | 736,625 | |||||||
The Williams Companies, Inc. | 25,000 | 618,000 | |||||||
3,830,605 | |||||||||
Personal Products - 2.3% | |||||||||
Avon Products, Inc. | 30,000 | 871,800 | |||||||
Professional Services - 2.6% | |||||||||
Robert Half International, Inc. | 32,500 | 994,500 |
The accompanying notes are an integral part of these financial statements.
11
LKCM Aquinas Value Fund |
Schedule of Investments, Continued |
December 31, 2010
COMMON STOCKS | Shares | Value | |||||||
Software - 5.9% | |||||||||
Adobe Systems Incorporated (a) | 22,500 | $ | 692,550 | ||||||
Nuance Communications, Inc. (a) | 40,000 | 727,200 | |||||||
Oracle Corporation | 27,500 | 860,750 | |||||||
2,280,500 | |||||||||
Specialty Retail - 6.4% | |||||||||
Foot Locker, Inc. | 52,500 | 1,030,050 | |||||||
The Home Depot, Inc. | 12,800 | 448,768 | |||||||
PetSmart, Inc. | 10,000 | 398,200 | |||||||
RadioShack Corporation | 32,500 | 600,925 | |||||||
2,477,943 | |||||||||
TOTAL COMMON STOCKS | |||||||||
(Cost $29,502,156) | 37,726,643 | ||||||||
SHORT-TERM INVESTMENTS - 1.8% | |||||||||
Money Market Funds (c) - 1.8% | |||||||||
Federated Government Obligations | |||||||||
Fund - Institutional Shares, 0.02% | 683,333 | 683,333 | |||||||
TOTAL SHORT-TERM INVESTMENTS | |||||||||
(Cost $683,333) | 683,333 | ||||||||
Total Investments - 100.1% | |||||||||
(Cost $30,185,489) | 38,409,976 | ||||||||
Liabilities in Excess of Other Assets - (0.1)% | (56,369 | ) | |||||||
TOTAL NET ASSETS - 100.0% | $ | 38,353,607 |
(a)Non-income producing security.
(b)U.S. Dollar-denominated foreign security.
(c)The rate quoted is the annualized seven-day yield of the fund at period end.
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
12
LKCM Aquinas Growth Fund |
Schedule of Investments |
December 31, 2010
COMMON STOCKS - 94.0% | Shares | Value | |||||||
Aerospace & Defense - 3.3% | |||||||||
The Boeing Company | 7,000 | $ | 456,820 | ||||||
Rockwell Collins, Inc. | 10,000 | 582,600 | |||||||
1,039,420 | |||||||||
Air Freight & Logistics - 3.9% | |||||||||
C.H. Robinson Worldwide, Inc. | 7,000 | 561,330 | |||||||
FedEx Corp. | 7,000 | 651,070 | |||||||
1,212,400 | |||||||||
Beverages - 2.1% | |||||||||
The Coca-Cola Company | 10,000 | 657,700 | |||||||
Biotechnology - 1.5% | |||||||||
Celgene Corporation (a) | 8,000 | 473,120 | |||||||
Chemicals - 4.4% | |||||||||
FMC Corporation | 10,000 | 798,900 | |||||||
Monsanto Company | 8,000 | 557,120 | |||||||
1,356,020 | |||||||||
Communications Equipment - 1.3% | |||||||||
Cisco Systems, Inc. (a) | 20,000 | 404,600 | |||||||
Computers & Peripherals - 8.9% | |||||||||
Apple Inc. (a) | 2,500 | 806,400 | |||||||
EMC Corporation (a) | 30,000 | 687,000 | |||||||
International Business Machines Corporation | 5,000 | 733,800 | |||||||
NetApp, Inc. (a) | 10,000 | 549,600 | |||||||
2,776,800 | |||||||||
Construction & Engineering - 2.2% | |||||||||
Foster Wheeler AG (a) (b) | 20,000 | 690,400 | |||||||
Consumer Finance - 1.4% | |||||||||
American Express Company | 10,000 | 429,200 | |||||||
Diversified Financial Services - 1.1% | |||||||||
Visa Inc. - Class A | 5,000 | 351,900 | |||||||
Electrical Equipment - 2.8% | |||||||||
Emerson Electric Co. | 15,000 | 857,550 | |||||||
Electronic Equipment & Instruments - 2.9% | |||||||||
National Instruments Corporation | 12,000 | 451,680 | |||||||
Trimble Navigation Limited (a) | 11,000 | 439,230 | |||||||
890,910 | |||||||||
Energy Equipment & Services - 1.7% | |||||||||
National Oilwell Varco, Inc. | 8,000 | 538,000 | |||||||
Food & Staples Retailing - 2.3% | |||||||||
Costco Wholesale Corporation | 10,000 | 722,100 | |||||||
Health Care Equipment & Supplies - 3.7% | |||||||||
Covidien plc (b) | 13,000 | 593,580 | |||||||
Thermo Fisher Scientific, Inc. (a) | 10,000 | 553,600 | |||||||
1,147,180 | |||||||||
Health Care Providers & Services - 1.4% | |||||||||
Express Scripts, Inc. (a) | 8,000 | 432,400 | |||||||
Hotels, Restaurants & Leisure - 2.2% | |||||||||
Carnival Corporation (b) | 15,000 | 691,650 | |||||||
Household Products - 3.6% | |||||||||
Colgate-Palmolive Company | 6,000 | 482,220 | |||||||
The Procter & Gamble Company | 10,000 | 643,300 | |||||||
1,125,520 | |||||||||
Insurance - 2.3% | |||||||||
Prudential Financial, Inc. | 12,000 | 704,520 | |||||||
Internet Software & Services - 9.5% | |||||||||
Akamai Technologies, Inc. (a) | 10,000 | 470,500 | |||||||
Amazon.com, Inc. (a) | 4,000 | 720,000 | |||||||
Expedia, Inc. | 30,000 | 752,700 | |||||||
Google Inc. - Class A (a) | 1,000 | 593,970 | |||||||
Yahoo! Inc. (a) | 25,000 | 415,750 | |||||||
2,952,920 | |||||||||
Life Sciences Tools & Services - 1.7% | |||||||||
PerkinElmer, Inc. | 20,000 | 516,400 | |||||||
Machinery - 2.4% | |||||||||
Danaher Corporation | 16,000 | 754,720 | |||||||
Metals & Mining - 1.6% | |||||||||
Reliance Steel & Aluminum Co. | 10,000 | 511,000 | |||||||
Oil & Gas Exploration & Production | |||||||||
Companies - 7.6% | |||||||||
Brigham Exploration Company (a) | 30,000 | 817,200 | |||||||
Cabot Oil & Gas Corporation | 13,000 | 492,050 | |||||||
Range Resources Corporation | 10,000 | 449,800 | |||||||
SM Energy Company | 10,000 | 589,300 | |||||||
2,348,350 | |||||||||
Personal Products - 1.1% | |||||||||
Avon Products, Inc. | 12,000 | 348,720 | |||||||
Semiconductor & Semiconductor | |||||||||
Equipment - 1.4% | |||||||||
Intel Corporation | 20,000 | 420,600 | |||||||
Software - 8.0% | |||||||||
Adobe Systems Incorporated (a) | 15,000 | 461,700 | |||||||
Citrix Systems, Inc. (a) | 7,000 | 478,870 | |||||||
Nuance Communications, Inc. (a) | 18,000 | 327,240 | |||||||
Oracle Corporation | 20,000 | 626,000 | |||||||
TIBCO Software Inc. (a) | 30,000 | 591,300 | |||||||
2,485,110 | |||||||||
Specialty Retail - 7.7% | |||||||||
Dick’s Sporting Goods, Inc. (a) | 13,000 | 487,500 | |||||||
Guess?, Inc. | 10,000 | 473,200 | |||||||
Tractor Supply Company | 15,000 | 727,350 | |||||||
Williams-Sonoma, Inc. | 20,000 | 713,800 | |||||||
2,401,850 | |||||||||
TOTAL COMMON STOCKS | |||||||||
(Cost $21,310,301) | 29,241,060 |
The accompanying notes are an integral part of these financial statements.
13
LKCM Aquinas Growth Fund |
Schedule of Investments, Continued |
December 31, 2010
SHORT-TERM INVESTMENTS - 6.3% | Shares | Value | |||||||
Money Market Funds (c) - 6.3% | |||||||||
The AIM STIT - Treasury Portfolio - | |||||||||
Institutional Shares, 0.04% | 140,109 | $ | 140,109 | ||||||
Dreyfus Government Cash Management | |||||||||
Fund - Institutional Shares, 0.01% | 907,336 | 907,336 | |||||||
Federated Government Obligations | |||||||||
Fund - Institutional Shares, 0.02% | 917,752 | 917,752 | |||||||
TOTAL SHORT-TERM INVESTMENTS | |||||||||
(Cost $1,965,197) | 1,965,197 | ||||||||
Total Investments - 100.3% | |||||||||
(Cost $23,275,498) | 31,206,257 | ||||||||
Liabilities in Excess of Other Assets - (0.3)% | (107,165 | ) | |||||||
TOTAL NET ASSETS - 100.0% | $ | 31,099,092 |
(a)Non-income producing security.
(b)U.S. Dollar-denominated foreign security.
(c)The rate quoted is the annualized seven-day yield of the fund at period end.
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
14
LKCM Aquinas Small Cap Fund |
Schedule of Investments |
December 31, 2010
COMMON STOCKS - 93.3% | Shares | Value | |||||||
Aerospace & Defense - 1.4% | |||||||||
Hexcel Corporation (a) | 4,950 | $ | 89,546 | ||||||
Air Freight & Logistics - 2.4% | |||||||||
Forward Air Corporation | 2,200 | 62,436 | |||||||
UTI Worldwide, Inc. (b) | 4,500 | 95,400 | |||||||
157,836 | |||||||||
Auto Components - 1.7% | |||||||||
LKQ Corporation (a) | 2,700 | 61,344 | |||||||
Westport Innovations Inc. (a) (b) | 2,750 | 50,930 | |||||||
112,274 | |||||||||
Capital Markets - 1.1% | |||||||||
Raymond James Financial, Inc. | 2,150 | 70,305 | |||||||
Chemicals - 1.6% | |||||||||
Calgon Carbon Corporation (a) | 2,400 | 36,288 | |||||||
Cytec Industries Inc. | 1,300 | 68,978 | |||||||
105,266 | |||||||||
Commercial Banks - 5.4% | |||||||||
First Horizon National Corporation | 4,543 | 53,515 | |||||||
Glacier Bancorp, Inc. | 2,850 | 43,063 | |||||||
Home Bancshares Inc. | 2,350 | 51,771 | |||||||
Prosperity Bancshares, Inc. | 2,000 | 78,560 | |||||||
Texas Capital Bancshares, Inc. (a) | 3,500 | 74,445 | |||||||
Umpqua Holdings Corporation | 4,150 | 50,547 | |||||||
351,901 | |||||||||
Commercial Services & Supplies - 2.8% | |||||||||
Administaff, Inc. | 3,400 | 99,620 | |||||||
Interface, Inc. - Class A | 5,150 | 80,597 | |||||||
180,217 | |||||||||
Communications Equipment - 0.7% | |||||||||
Arris Group Inc. (a) | 4,200 | 47,124 | |||||||
Computers & Peripherals - 3.7% | |||||||||
Brocade Communications Systems, Inc. (a) | 14,800 | 78,292 | |||||||
Compellent Technologies, Inc. (a) | 3,450 | 95,185 | |||||||
SMART Technologies Inc. - Class A (a) (b) | 6,950 | 65,608 | |||||||
239,085 | |||||||||
Consumer Finance - 2.4% | |||||||||
Cash America International, Inc. | 1,850 | 68,320 | |||||||
First Cash Financial Services, Inc. (a) | 2,750 | 85,223 | |||||||
153,543 | |||||||||
Containers & Packaging - 0.9% | |||||||||
Silgan Holdings Inc. | 1,700 | 60,877 | |||||||
Distributors - 1.7% | |||||||||
WESCO International, Inc. (a) | 2,100 | 110,880 | |||||||
Diversified Consumer Services - 2.0% | |||||||||
American Public Education Inc. (a) | 2,200 | 81,928 | |||||||
Capella Education Company (a) | 750 | 49,935 | |||||||
131,863 | |||||||||
Diversified Manufacturing - 0.9% | |||||||||
Raven Industries, Inc. | 1,200 | 57,228 | |||||||
Electrical Equipment - 1.2% | |||||||||
Belden Inc. | 2,050 | 75,481 | |||||||
Electronic Equipment & Instruments - 3.4% | |||||||||
National Instruments Corporation | 2,300 | 86,572 | |||||||
Rofin-Sinar Technologies, Inc. (a) | 1,850 | 65,564 | |||||||
Trimble Navigation Limited (a) | 1,700 | 67,881 | |||||||
220,017 | |||||||||
Energy Equipment & Services - 3.5% | |||||||||
CARBO Ceramics Inc. | 800 | 82,832 | |||||||
Core Laboratories N.V. (b) | 700 | 62,335 | |||||||
Dril-Quip, Inc. (a) | 1,050 | 81,606 | |||||||
226,773 | |||||||||
Food & Staples Retailing - 1.3% | |||||||||
Ruddick Corporation | 1,850 | 68,154 | |||||||
SunOpta Inc. (a) (b) | 1,950 | 15,249 | |||||||
83,403 | |||||||||
Health Care Equipment & Supplies - 1.0% | |||||||||
Zoll Medical Corporation (a) | 1,800 | 67,014 | |||||||
Health Care Providers & Services - 5.5% | |||||||||
HMS Holdings Corporation (a) | 1,200 | 77,724 | |||||||
MWI Veterinary Supply, Inc. (a) | 1,850 | 116,827 | |||||||
PAREXEL International Corporation (a) | 4,150 | 88,105 | |||||||
PSS World Medical, Inc. (a) | 3,400 | 76,840 | |||||||
359,496 | |||||||||
Hotels, Restaurants & Leisure - 2.4% | |||||||||
BJ’s Restaurants, Inc. (a) | 1,400 | 49,602 | |||||||
Buffalo Wild Wings Inc. (a) | 900 | 39,465 | |||||||
LIFE TIME FITNESS, Inc. (a) | 1,650 | 67,633 | |||||||
156,700 | |||||||||
Household Durables - 1.0% | |||||||||
Tempur-Pedic International Inc. (a) | 1,600 | 64,096 | |||||||
Insurance - 0.5% | |||||||||
AmTrust Financial Services, Inc. | 1,950 | 34,125 | |||||||
Internet Software & Services - 2.0% | |||||||||
Digital River, Inc. (a) | 1,700 | 58,514 | |||||||
LogMeIn, Inc. (a) | 1,600 | 70,944 | |||||||
129,458 | |||||||||
Investment Bank & Brokerage - 1.1% | |||||||||
Evercore Partners, Inc. - Class A | 2,100 | 71,400 | |||||||
Leisure Equipment & Products - 2.0% | |||||||||
Brunswick Corporation | 4,100 | 76,834 | |||||||
RC2 Corporation (a) | 2,400 | 52,248 | |||||||
129,082 | |||||||||
Life Sciences Tools & Services - 0.5% | |||||||||
Dionex Corporation (a) | 250 | 29,503 |
The accompanying notes are an integral part of these financial statements.
15
LKCM Aquinas Small Cap Fund |
Schedule of Investments, Continued |
December 31, 2010
COMMON STOCKS | Shares | Value | |||||||
Machinery - 6.8% | |||||||||
Actuant Corporation - Class A | 2,700 | $ | 71,874 | ||||||
Astec Industries, Inc. (a) | 2,300 | 74,543 | |||||||
CIRCOR International, Inc. | 1,800 | 76,104 | |||||||
CLARCOR Inc. | 1,750 | 75,057 | |||||||
EnPro Industries, Inc. (a) | 1,650 | 68,574 | |||||||
The Middleby Corporation (a) | 900 | 75,978 | |||||||
442,130 | |||||||||
Marine - 0.9% | |||||||||
Kirby Corporation (a) | 1,350 | 59,468 | |||||||
Media - 2.7% | |||||||||
Cinemark Holdings, Inc. | 2,900 | 49,996 | |||||||
Live Nation Inc. (a) | 5,500 | 62,810 | |||||||
National CineMedia, Inc. | 3,300 | 65,703 | |||||||
178,509 | |||||||||
Metals & Mining - 2.5% | |||||||||
Carpenter Technology Corporation | 2,400 | 96,576 | |||||||
Haynes International, Inc. | 1,550 | 64,837 | |||||||
161,413 | |||||||||
Oil & Gas Drilling - 1.0% | |||||||||
Atwood Oceanics, Inc. (a) | 1,700 | 63,529 | |||||||
Oil & Gas Exploration & Production | |||||||||
Companies - 6.8% | |||||||||
Approach Resources Inc. (a) | 2,700 | 62,370 | |||||||
Brigham Exploration Company (a) | 3,500 | 95,340 | |||||||
Oasis Petroleum Inc. (a) | 3,300 | 89,496 | |||||||
Rosetta Resources, Inc. (a) | 3,000 | 112,920 | |||||||
SM Energy Company | 1,400 | 82,502 | |||||||
442,628 | |||||||||
Pharmaceuticals - 0.8% | |||||||||
Endo Pharmaceuticals Holdings Inc. (a) | 1,450 | 51,780 | |||||||
Semiconductor & Semiconductor | |||||||||
Equipment - 1.1% | |||||||||
Emulex Corporation (a) | 6,100 | 71,126 | |||||||
Software - 6.7% | |||||||||
ANSYS, Inc. (a) | 1,150 | 59,880 | |||||||
Aspen Technology, Inc. (a) | 5,250 | 66,675 | |||||||
MedAssets Inc. (a) | 4,200 | 84,798 | |||||||
MicroStrategy Incorporated - Class A (a) | 800 | 68,376 | |||||||
Pegasystems Inc. | 2,100 | 76,923 | |||||||
TIBCO Software Inc. (a) | 4,100 | 80,811 | |||||||
437,463 | |||||||||
Specialty Retail - 7.7% | |||||||||
DSW Inc. - Class A (a) | 2,404 | 93,996 | |||||||
Group 1 Automotive, Inc. | 1,300 | 54,288 | |||||||
Hibbett Sports Inc. (a) | 2,700 | 99,630 | |||||||
Jo-Ann Stores, Inc. (a) | 1,050 | 63,231 | |||||||
Monro Muffler Brake, Inc. | 1,700 | 58,803 | |||||||
Tractor Supply Company | 1,500 | 72,735 | |||||||
Ulta Salon, Cosmetics & Fragrance, Inc. (a) | 1,700 | 57,800 | |||||||
500,483 | |||||||||
Textiles, Apparel & Luxury Goods - 2.2% | |||||||||
Crocs, Inc. (a) | 4,950 | 84,744 | |||||||
The Warnaco Group, Inc. (a) | 1,100 | 60,577 | |||||||
145,321 | |||||||||
TOTAL COMMON STOCKS | |||||||||
(Cost $4,486,343) | 6,068,343 | ||||||||
SHORT-TERM INVESTMENTS - 8.4% | |||||||||
Money Market Funds (c) - 8.4% | |||||||||
The AIM STIT - Treasury Portfolio | |||||||||
Institutional Shares, 0.04% | 162,920 | 162,920 | |||||||
Dreyfus Government Cash Management | |||||||||
Fund - Institutional Shares, 0.01% | 192,468 | 192,468 | |||||||
Federated Government Obligations Fund - | |||||||||
Institutional Shares, 0.02% | 194,180 | 194,180 | |||||||
TOTAL SHORT-TERM INVESTMENTS | |||||||||
(Cost $549,568) | 549,568 | ||||||||
Total Investments - 101.7% | |||||||||
(Cost $5,035,911) | 6,617,911 | ||||||||
Liabilities in Excess of Other Assets - (1.7)% | (113,130 | ) | |||||||
TOTAL NET ASSETS - 100.0% | $ | 6,504,781 |
(a)Non-income producing security.
(b)U.S. Dollar-denominated foreign security.
(c)The rate quoted is the annualized seven-day yield of the fund at period end.
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
16
Statement of Assets and Liabilities |
December 31, 2010 |
LKCM | LKCM | LKCM | ||||||||||
Aquinas | Aquinas | Aquinas Small | ||||||||||
Value Fund | Growth Fund | Cap Fund | ||||||||||
Assets: | ||||||||||||
Investments, at value* | $ | 38,409,976 | $ | 31,206,257 | $ | 6,617,911 | ||||||
Cash | 41,325 | — | — | |||||||||
Dividends and interest receivable | 13,425 | 3,643 | 1,131 | |||||||||
Receivable from Adviser | — | — | 8,180 | |||||||||
Receivable for fund shares sold | 61,423 | 56,133 | 20,663 | |||||||||
Other assets | 15,071 | 12,340 | 10,409 | |||||||||
Total assets | 38,541,220 | 31,278,373 | 6,658,294 | |||||||||
Liabilities: | ||||||||||||
Payable for investments purchased | — | — | 126,732 | |||||||||
Payable for investment advisory fees | 82,329 | 61,001 | — | |||||||||
Payable for fund shares redeemed | 1,385 | 7,741 | 2,900 | |||||||||
Distribution expense payable | 76,512 | 83,228 | 5,719 | |||||||||
Accrued expenses and other liabilities | 27,387 | 27,311 | 18,162 | |||||||||
Total liabilities | 187,613 | 179,281 | 153,513 | |||||||||
Net assets | $ | 38,353,607 | $ | 31,099,092 | $ | 6,504,781 | ||||||
Net assets consist of: | ||||||||||||
Paid in capital | $ | 30,989,738 | $ | 23,506,716 | $ | 5,334,229 | ||||||
Undistributed net investment income | 11,691 | — | — | |||||||||
Accumulated net realized loss on securities | (872,309 | ) | (338,383 | ) | (411,448 | ) | ||||||
Net unrealized appreciation on investments | 8,224,487 | 7,930,759 | 1,582,000 | |||||||||
Net assets | $ | 38,353,607 | $ | 31,099,092 | $ | 6,504,781 | ||||||
Net assets | $ | 38,353,607 | $ | 31,099,092 | $ | 6,504,781 | ||||||
Shares of beneficial interest outstanding | ||||||||||||
(unlimited shares of no par value authorized) | 3,024,375 | 1,872,419 | 920,571 | |||||||||
Net asset value per share | ||||||||||||
(offering and redemption price) | $ | 12.68 | $ | 16.61 | $ | 7.07 | ||||||
* Cost of Investments | $ | 30,185,489 | $ | 23,275,498 | $ | 5,035,911 |
The accompanying notes are an integral part of these financial statements.
17
Statement of Operations |
For the year ended December 31, 2010 |
LKCM | LKCM | LKCM | ||||||||||
Aquinas | Aquinas | Aquinas Small | ||||||||||
Value Fund | Growth Fund | Cap Fund | ||||||||||
Investment Income: | ||||||||||||
Dividends * | $ | 531,968 | $ | 292,119 | $ | 29,858 | ||||||
Interest | 262 | 534 | 101 | |||||||||
Total income | 532,230 | 292,653 | 29,959 | |||||||||
Expenses: | ||||||||||||
Investment advisory fees | 316,402 | 267,354 | 53,351 | |||||||||
Distribution expense (Note B) | 87,890 | 74,265 | 13,337 | |||||||||
Accounting and transfer agent fees and expenses | 59,243 | 60,539 | 40,779 | |||||||||
Administrative fees | 30,903 | 28,195 | 21,805 | |||||||||
Federal and state registration | 23,310 | 22,852 | 21,160 | |||||||||
Professional fees | 11,770 | 10,689 | 4,871 | |||||||||
Reports to shareholders | 6,236 | 6,550 | 1,110 | |||||||||
Custody fees and expenses | 4,343 | 3,945 | 15,514 | |||||||||
Trustees’ fees | 4,061 | 4,000 | 630 | |||||||||
Other | 7,211 | 6,501 | 1,225 | |||||||||
Total expenses | 551,369 | 484,890 | 173,782 | |||||||||
Less, expense waiver and/or reimbursement (Note B) | (24,032 | ) | (39,300 | ) | (93,756 | ) | ||||||
Net expenses | 527,337 | 445,590 | 80,026 | |||||||||
Net investment income (loss) | 4,893 | (152,937 | ) | (50,067 | ) | |||||||
Realized and Unrealized Gain on Investments: | ||||||||||||
Net realized gain on investments | 2,400,892 | 3,577,347 | 736,556 | |||||||||
Net change in unrealized appreciation/depreciation on investments | 3,607,759 | 1,283,366 | 916,908 | |||||||||
Net Realized and Unrealized Gain on Investments | 6,008,651 | 4,860,713 | 1,653,464 | |||||||||
Net Increase in Net Assets Resulting from Operations | $ | 6,013,544 | $ | 4,707,776 | $ | 1,603,397 | ||||||
* Net of foreign taxes withheld | $ | — | $ | — | $ | 121 |
The accompanying notes are an integral part of these financial statements.
18
Statements of Changes in Net Assets |
LKCM Aquinas | LKCM Aquinas | |||||||||||||||
Value Fund | Growth Fund | |||||||||||||||
Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Operations: | ||||||||||||||||
Net investment income (loss) | $ | 4,893 | $ | 55,518 | $ | (152,937 | ) | $ | (87,271 | ) | ||||||
Net realized gain (loss) on investments | 2,400,892 | (2,432,411 | ) | 3,577,347 | (1,717,058 | ) | ||||||||||
Net change in unrealized | ||||||||||||||||
appreciation/depreciation on investments | 3,607,759 | 11,058,393 | 1,283,366 | 9,662,551 | ||||||||||||
Net increase in net assets | ||||||||||||||||
resulting from operations | 6,013,544 | 8,681,500 | 4,707,776 | 7,858,222 | ||||||||||||
Dividends and Distributions to Shareholders: | ||||||||||||||||
Net investment income | (18,215 | ) | (50,327 | ) | — | — | ||||||||||
Net increase (decrease) in net assets from | ||||||||||||||||
Fund share transactions (Note C) | (4,178,206 | ) | 2,721,347 | (7,679,841 | ) | (730,914 | ) | |||||||||
Total increase (decrease) in net assets | 1,817,123 | 11,352,520 | (2,972,065 | ) | 7,127,308 | |||||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 36,536,484 | 25,183,964 | 34,071,157 | 26,943,849 | ||||||||||||
End of period * | $ | 38,353,607 | $ | 36,536,484 | $ | 31,099,092 | $ | 34,071,157 | ||||||||
* Including undistributed net investment income of | $ | 11,691 | $ | 10,150 | $ | — | $ | — | ||||||||
LKCM Aquinas | ||||||||||||||||
Small Cap Fund | ||||||||||||||||
Year Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2010 | 2009 | |||||||||||||||
Operations: | ||||||||||||||||
Net investment loss | $ | (50,067 | ) | $ | (34,176 | ) | ||||||||||
Net realized gain (loss) on investments | 736,556 | (448,448 | ) | |||||||||||||
Net change in unrealized | ||||||||||||||||
appreciation/depreciation on investments | 916,908 | 1,627,698 | ||||||||||||||
Net increase in net assets | ||||||||||||||||
resulting from operations | 1,603,397 | 1,145,074 | ||||||||||||||
Net increase (decrease) in net assets | ||||||||||||||||
from Fund share transactions (Note C) | (363,310 | ) | 716,457 | |||||||||||||
Total increase in net assets | 1,240,087 | 1,861,531 | ||||||||||||||
Net Assets: | ||||||||||||||||
Beginning of period | 5,264,694 | 3,403,163 | ||||||||||||||
End of period* | $ | 6,504,781 | $ | 5,264,694 | ||||||||||||
* Including undistributed net investment income of | $ | — | $ | — |
The accompanying notes are an integral part of these financial statements.
19
Financial Highlights |
Selected Data for Each Share of Capital Stock Outstanding |
LKCM Aquinas Value Fund | ||||||||||||||||||||
Year | Year | Year | Year | Year | ||||||||||||||||
Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Net Asset Value - Beginning of Period | $ | 10.82 | $ | 8.15 | $ | 13.07 | $ | 13.71 | $ | 12.24 | ||||||||||
Net investment income | 0.00 | (1) | 0.02 | 0.04 | 0.10 | 0.07 | ||||||||||||||
Net realized and unrealized gain (loss) on investments | 1.87 | 2.67 | (4.92 | ) | 1.01 | 1.95 | ||||||||||||||
Total from investment operations | 1.87 | 2.69 | (4.88 | ) | 1.11 | 2.02 | ||||||||||||||
Dividends from net investment income | (0.01 | ) | (0.02 | ) | (0.04 | ) | (0.10 | ) | (0.11 | ) | ||||||||||
Distributions from net realized gains | — | — | — | (1.65 | ) | (0.44 | ) | |||||||||||||
Total dividends and distributions | (0.01 | ) | (0.02 | ) | (0.04 | ) | (1.75 | ) | (0.55 | ) | ||||||||||
Net Asset Value - End of Period | $ | 12.68 | $ | 10.82 | $ | 8.15 | $ | 13.07 | $ | 13.71 | ||||||||||
Total Return | 17.25 | % | 32.94 | % | (37.34 | )% | 8.05 | % | 16.51 | % | ||||||||||
Ratios and Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (thousands) | $ | 38,354 | $ | 36,536 | $ | 25,184 | $ | 37,436 | $ | 39,826 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Before expense waiver and/or reimbursement | 1.57 | % | 1.65 | % | 1.58 | % | 1.49 | % | 1.49 | % | ||||||||||
After expense waiver and/or reimbursement | 1.50 | % | 1.50 | % | 1.50 | % | 1.49 | % | 1.49 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
Before expense waiver and/or reimbursement | (0.06 | )% | 0.04 | % | 0.28 | % | 0.65 | % | 0.44 | % | ||||||||||
After expense waiver and/or reimbursement | 0.01 | % | 0.19 | % | 0.36 | % | 0.65 | % | 0.44 | % | ||||||||||
Portfolio turnover rate | 31 | % | 29 | % | 70 | % | 62 | % | 47 | % |
(1) | Amount is less than $0.005. |
LKCM Aquinas Growth Fund | ||||||||||||||||||||
Year | Year | Year | Year | Year | ||||||||||||||||
Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Net Asset Value - Beginning of Period | $ | 14.25 | $ | 10.96 | $ | 16.38 | $ | 15.45 | $ | 15.61 | ||||||||||
Net investment income (loss) | (0.08 | )(1) | (0.04 | )(1) | (0.05 | )(1) | 0.01 | (0.06 | )(1) | |||||||||||
Net realized and unrealized gain (loss) on investments | 2.44 | 3.33 | (5.37 | ) | 1.97 | 0.03 | ||||||||||||||
Total from investment operations | 2.36 | 3.29 | (5.42 | ) | 1.98 | (0.03 | ) | |||||||||||||
Dividends from net investment income | — | — | (0.00 | )(2) | (0.01 | ) | — | |||||||||||||
Distributions from net realized gains | — | — | — | (1.04 | ) | (0.13 | ) | |||||||||||||
Total dividends and distributions | — | — | (0.00 | )(2) | (1.05 | ) | (0.13 | ) | ||||||||||||
Net Asset Value - End of Period | $ | 16.61 | $ | 14.25 | $ | 10.96 | $ | 16.38 | $ | 15.45 | ||||||||||
Total Return | 16.56 | % | 30.02 | % | (33.07 | )% | 12.75 | % | (0.22 | )% | ||||||||||
Ratios and Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (thousands) | $ | 31,099 | $ | 34,071 | $ | 26,944 | $ | 42,073 | $ | 58,997 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Before expense waiver and/or reimbursement | 1.63 | % | 1.66 | % | 1.56 | % | 1.47 | % | 1.46 | % | ||||||||||
After expense waiver and/or reimbursement | 1.50 | % | 1.50 | % | 1.50 | % | 1.47 | % | 1.46 | % | ||||||||||
Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
Before expense waiver and/or reimbursement | (0.65 | )% | (0.46 | )% | (0.40 | )% | 0.06 | % | (0.36 | )% | ||||||||||
After expense waiver and/or reimbursement | (0.52 | )% | (0.30 | )% | (0.34 | )% | 0.06 | % | (0.36 | )% | ||||||||||
Portfolio turnover rate | 46 | % | 47 | % | 67 | % | 40 | % | 73 | % |
(1) | Net investment loss per share is calculated using the ending balance of undistributed net investment loss prior to considerations of adjustments for permanent book and tax differences. |
(2) | Less than $(0.005). |
The accompanying notes are an integral part of these financial statements.
20
Financial Highlights |
Selected Data for Each Share of Capital Stock Outstanding |
LKCM Aquinas Small Cap Fund | ||||||||||||||||||||
Year | Year | Year | Year | Year | ||||||||||||||||
Ended | Ended | Ended | Ended | Ended | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | ||||||||||||||||
Net Asset Value - Beginning of Period | $ | 5.25 | $ | 4.03 | $ | 6.47 | $ | 6.58 | $ | 5.82 | ||||||||||
Net investment loss | (0.05 | )(1) | (0.04 | )(2) | (0.04 | )(2) | (0.03 | )(1) | (0.04 | )(1) | ||||||||||
Net realized and unrealized gain (loss) on investments | 1.87 | 1.26 | (2.40 | ) | 0.04 | 0.80 | ||||||||||||||
Total from investment operations | 1.82 | 1.22 | (2.44 | ) | 0.01 | 0.76 | ||||||||||||||
Distributions from net realized gains | — | — | (0.00 | )(3) | (0.12 | ) | — | |||||||||||||
Net Asset Value - End of Period | $ | 7.07 | $ | 5.25 | $ | 4.03 | $ | 6.47 | $ | 6.58 | ||||||||||
Total Return | 34.67 | % | 30.27 | % | (37.64 | )% | 0.08 | % | 13.06 | % | ||||||||||
Ratios and Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (thousands) | $ | 6,505 | $ | 5,265 | $ | 3,403 | $ | 10,790 | $ | 10,957 | ||||||||||
Ratio of expenses to average net assets: | ||||||||||||||||||||
Before expense waiver and/or reimbursement | 3.26 | % | 3.68 | % | 2.91 | % | 2.18 | % | 2.32 | % | ||||||||||
After expense waiver and/or reimbursement | 1.50 | % | 1.50 | % | 1.50 | % | 1.50 | % | 1.50 | % | ||||||||||
Ratio of net investment loss to average net assets: | ||||||||||||||||||||
Before expense waiver and/or reimbursement | (2.70 | )% | (3.03 | )% | (2.11 | )% | (1.18 | )% | (1.53 | )% | ||||||||||
After expense waiver and/or reimbursement | (0.94 | )% | (0.85 | )% | (0.70 | )% | (0.50 | )% | (0.71 | )% | ||||||||||
Portfolio turnover rate | 84 | % | 66 | % | 91 | % | 66 | % | 91 | % |
(1) | Net investment loss per share is calculated using the ending balance of undistributed net investment loss prior to considerations of adjustments for permanent book and tax differences. |
(2) | Net investment loss per share represents net investment loss divided by the average shares outstanding throughout the period. |
(3) | Less than $(0.005). |
The accompanying notes are an integral part of these financial statements.
21
LKCM Funds |
Notes to the Financial Statements |
A. Organization and Significant Accounting Policies: LKCM Funds (the “Trust”) is registered under the Investment Company Act of 1940 (“1940 Act”) as an open-end, management investment company. The Trust was organized as a Delaware business trust on February 10, 1994 and consists of eight diversified series of shares, three of which are the LKCM Aquinas Value, LKCM Aquinas Growth and LKCM Aquinas Small Cap Funds (collectively, the “Funds”) and are reported here. On July 11, 2005, the Funds acquired the assets and assumed the liabilities of the Aquinas Funds. The LKCM Aquinas Value, LKCM Aquinas Growth and LKCM Aquinas Small Cap Funds are subject to expenses pursuant to the Rule 12b-1 plan described in Note B. Each Fund charges a 1% redemption fee for redemptions on Fund shares held for less than 30 days.
The LKCM Aquinas Value Fund seeks to maximize long-term capital appreciation, while incorporating Catholic values investing principles in the investment process. The LKCM Aquinas Value Fund seeks to achieve its investment objective by investing in equity securities of companies that Luther King Capital Management Corporation (the “Adviser”) believes to be undervalued relative to a company’s earnings. The LKCM Aquinas Growth Fund seeks to maximize long-term capital appreciation, while incorporating Catholic values investing principles in the investment process. The LKCM Aquinas Growth Fund seeks to achieve its investment objective by investing in equity securities of companies that the Adviser believes generally have above-average growth in revenue and/or earnings, above-average returns on shareholders’ equity, underleveraged balance sheets and potential for above-average capital appreciation. The LKCM Aquinas Small Cap Fund seeks to maximize long-term capital appreciation, while incorporating Catholic values investing principles in the investment process. The LKCM Aquinas Small Cap Fund seeks to achieve its investment objective by investing in equity securities of smaller companies (those with market capitalizations at the time of investment between $400 million and $2.5 billion) that the Adviser believes are likely to have above-average growth in revenue and/or earnings and potential for above-average capital appreciation.
The LKCM Aquinas Funds practice socially responsible investing within the framework provided by the United States Conference of Catholic Bishops’ Socially Responsible Investing Guidelines (“Guidelines”). Each Fund’s investment approach incorporates the Guidelines through a combination of screening portfolio companies based on criteria set forth in the Guidelines, dialogue with companies whose policies and practices conflict with the Guidelines, and potentially excluding from the Fund’s portfolios the securities of those companies that are unwilling to alter their policies and practices over a reasonable period of time. The Adviser monitors companies selected for the Funds for policies on various issues contemplated by the Guidelines. If a Fund invests in a company whose policies and practices are inconsistent with the Guidelines, the Adviser may attempt to influence the company, sell the company’s securities or otherwise exclude future investments in such company.
The following is a summary of significant accounting policies followed by the Funds in preparation of the financial statements.
1. Security Valuation: Securities listed on a U.S. securities exchange for which market quotations are readily available are valued at the last quoted sale price, taken from the exchange where the security is primarily traded. Nasdaq National Market securities are valued at the Nasdaq Official Closing Price (“NOCP”). Unlisted U.S. securities and listed U.S. securities not traded on the valuation date for which market quotations are readily available are valued at the mean of the most recent quoted bid and asked price. Securities listed on a foreign exchange for which market quotations are readily available are valued at the last quoted sales price available before the time when assets are valued. Debt securities (other than obligations having a maturity of 60 days or less) are normally valued at the mean of bid and ask price and/or by using a combination of daily quotes or matrix evaluations provided by an independent pricing service. Debt securities purchased with remaining maturities of 60 days or less are valued at amortized cost which approximates fair value. Other assets and securities for which no quotations are readily available (including restricted securities) are valued in good faith at fair value using methods determined by the Board of Trustees. The Board has adopted specific procedures for valuing portfolio securities and delegated the implementation of these procedures to the Adviser. The procedures authorize the Adviser to make all determinations regarding the fair value of a portfolio security and to report such determinations to the Board of Trustees. The Funds may also use independent pricing services to assist in pricing portfolio securities.
The Trust has adopted accounting standards which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion of changes in valuation techniques and related inputs during the period. These standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Management has determined that these standards have no material impact on the Funds’ financial statements. The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability. These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized in the three broad levels listed below.
22
Level 1 - | Quoted unadjusted prices for identical instruments in active markets to which the Trust has access at the date of measurement. | |
Level 2 - | Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers. | |
Level 3 - | Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Trust’s own assumptions that market participants would use to price the asset or liability based on the best available information. |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the Funds’ net assets as of December 31, 2010:
LKCM Aquinas Value Fund | |||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Common Stocks | $ | 37,726,643 | $ | — | $ | — | $ | 37,726,643 | |||||||||
Money Market Funds | 683,333 | — | — | 683,333 | |||||||||||||
Total Investments* | $ | 38,409,976 | $ | — | $ | — | $ | 38,409,976 | |||||||||
LKCM Aquinas Growth Fund | |||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Common Stocks | $ | 29,241,060 | $ | — | $ | — | $ | 29,241,060 | |||||||||
Money Market Funds | 1,965,197 | — | — | 1,965,197 | |||||||||||||
Total Investments* | $ | 31,206,257 | $ | — | $ | — | $ | 31,206,257 | |||||||||
LKCM Aquinas Small Cap Fund | |||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Common Stocks | $ | 6,068,343 | $ | — | $ | — | $ | 6,068,343 | |||||||||
Money Market Funds | 549,568 | — | — | 549,568 | |||||||||||||
Total Investments* | $ | 6,617,911 | $ | — | $ | — | $ | 6,617,911 |
* Additional information regarding the industry and/or geographical classifications of these investments is disclosed in the Schedule of Investments.
In January 2010, FASB issued Accounting Standards Update No. 2010-06, Improving Disclosures about Fair Value Measurements (ASU 2010-06). ASU 2010-06 requires new disclosures regarding transfers in and out of Levels 1 and 2 (effective for interim and annual periods beginning after December 15, 2009), as well as additional details regarding Level 3 transaction activity (effective for interim and annual periods beginning after December 15, 2010). There were no significant transfers into or out of Level 1, Level 2 or Level 3 fair value measurements during the reporting period, as compared to their classification from the previous annual report.
In March 2008, the Trust adopted an accounting standard involving disclosures of derivatives and hedging activities that is effective for fiscal years beginning after November 15, 2008. The standard is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivative instruments affect an entity’s results of operations and financial position. The standard does not have any impact on the Funds’ financial disclosures because the Funds have not maintained any positions in derivative instruments or engaged in hedging activities during the year ended December 31, 2010.
In preparing these financial statements, the Trust has evaluated events after December 31, 2010 and determined that there were no significant subsequent events that would require adjustment to or additional disclosure in these financial statements.
2. Federal Income Taxes: The Funds have elected to be treated as “regulated investment companies” under Subchapter M of the Internal Revenue Code and each Fund intends to distribute all of its investment company net taxable income and net capital gains to shareholders. Therefore, no federal income tax provision is recorded.
3. Distributions to Shareholders: The LKCM Aquinas Value, LKCM Aquinas Growth and LKCM Aquinas Small Cap Funds generally intend to pay dividends and net capital gain distributions, if any, at least on an annual basis.
23
4. Foreign Securities: Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in U.S. companies and securities of the U.S. government. These risks include devaluation of currencies and future adverse political and economic developments. Moreover, securities of many foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies and securities of the U.S. government.
5. Expense Allocation: Expenses incurred by the Funds are allocated among the Funds based upon (i) relative average net assets, (ii) a specific identification basis as incurred, or (iii) evenly among the Funds, depending on the nature of the expense.
6. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
7. Guarantees and Indemnifications: In the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims against the Funds that have not yet occurred. Based on experience, the Funds expect the risk of loss to be remote.
8. Other: Security and shareholder transactions are recorded on the trade date. Realized gains and losses on sales of investments are calculated on the identified cost basis. Dividend income and dividends and distributions to shareholders are recorded on the ex-dividend date. Interest income is recognized on the accrual basis. All discounts and premiums are amortized based on the effective interest method for tax and financial reporting purposes.
Generally accepted accounting principles require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share.
Accordingly, at December 31, 2010, reclassifications were recorded as follows:
LKCM | LKCM | LKCM | |||||||||||
Aquinas | Aquinas | Aquinas Small | |||||||||||
Value Fund | Growth Fund | Cap Fund | |||||||||||
Undistributed net investment income | $ | 14,863 | $ | 152,937 | $ | 50,067 | |||||||
Accumulated gain | — | (2,118 | ) | (513 | ) | ||||||||
Paid in capital | (14,863 | ) | (150,819 | ) | (49,554 | ) |
9. Restricted and Illiquid Securities: The Funds are permitted to invest in securities that are subject to legal or contractual restrictions on resale or are illiquid. Restricted securities generally may be resold in transactions exempt from registration. A security may be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at the current valuation may be difficult.
B. Investment Advisory and Other Agreements: Luther King Capital Management Corporation (the “Adviser”), serves as the investment adviser to the Funds under an Investment Advisory Agreement (the “Agreement”). The Adviser receives a fee, computed daily and payable quarterly, at the annual rates presented below as applied to each Fund’s average daily net assets. The Adviser has contractually agreed to waive all or a portion of its management fee and/or reimburse the Funds through April 30, 2011 in order to limit each Fund’s operating expenses to the annual cap rates identified below. For the year ended December 31, 2010, the Adviser reimbursed the following expenses:
LKCM | LKCM | LKCM | ||
Aquinas | Aquinas | Aquinas Small | ||
Value Fund | Growth Fund | Cap Fund | ||
Annual Advisory Rate | 0.90% | 0.90% | 1.00% | |
Annual Cap on Expenses | 1.50% | 1.50% | 1.50% | |
Expenses Reimbursed in 2010 | $24,032 | $39,300 | $93,756 |
U.S. Bancorp Fund Services, LLC serves as transfer agent and administrator for the Trust and serves as accounting services agent for the Funds. U.S. Bank, N.A. serves as custodian for the Funds.
Distribution services are performed pursuant to a distribution contract with Quasar Distributors, LLC, the Trust’s principal underwriter.
The LKCM Funds have adopted a Rule 12b-1 plan for the LKCM Aquinas Value, LKCM Aquinas Growth and LKCM Aquinas Small Cap Funds, under which each Fund may pay up to 1.00% of its average daily net assets for distribution and other services. However, the Board of Trustees has currently only authorized a fee of 0.25% of the average daily net assets for the LKCM Aquinas Value, LKCM Aquinas Growth and LKCM Aquinas Small Cap Funds. For the year ended December 31, 2010, fees accrued by the LKCM Aquinas Value, LKCM Aquinas Growth and LKCM Aquinas Small Cap Funds pursuant to the 12b-1 Plan were $87,890, $74,265 and $13,337, respectively.
24
C. Fund Shares: At December 31, 2010, there was an unlimited number of shares of beneficial interest, no par value, authorized. The following table summarizes the activity in shares of each Fund:
LKCM Aquinas Value Fund | ||||||||||||||||
Year Ended | Year Ended | |||||||||||||||
December 31, 2010 | December 31, 2009 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | 766,470 | $ | 8,583,299 | 661,469 | $ | 5,960,330 | ||||||||||
Shares issued to shareholders | ||||||||||||||||
in reinvestment of distributions | 1,184 | 15,033 | 4,414 | 48,199 | ||||||||||||
Shares redeemed | (1,120,562 | ) | (12,776,756 | ) | (377,448 | ) | (3,287,285 | ) | ||||||||
Redemption fee | 218 | 103 | ||||||||||||||
Net increase (decrease) | (352,908 | ) | $ | (4,178,206 | ) | 288,435 | $ | 2,721,347 | ||||||||
Shares Outstanding: | ||||||||||||||||
Beginning of period | 3,377,283 | 3,088,848 | ||||||||||||||
End of period | 3,024,375 | 3,377,283 | ||||||||||||||
LKCM Aquinas Growth Fund | ||||||||||||||||
Year Ended | Year Ended | |||||||||||||||
December 31, 2010 | December 31, 2009 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | 223,140 | $ | 3,260,822 | 309,570 | $ | 3,787,992 | ||||||||||
Shares redeemed | (741,027 | ) | (10,940,760 | ) | (377,902 | ) | (4,518,948 | ) | ||||||||
Redemption fee | 97 | 42 | ||||||||||||||
Net decrease | (517,887 | ) | $ | (7,679,841 | ) | (68,332 | ) | $ | (730,914 | ) | ||||||
Shares Outstanding: | ||||||||||||||||
Beginning of period | 2,390,306 | 2,458,638 | ||||||||||||||
End of period | 1,872,419 | 2,390,306 | ||||||||||||||
LKCM Aquinas Small Cap Fund | ||||||||||||||||
Year Ended | Year Ended | |||||||||||||||
December 31, 2010 | December 31, 2009 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares sold | 419,940 | $ | 2,518,238 | 237,925 | $ | 1,047,685 | ||||||||||
Shares redeemed | (501,793 | ) | (2,881,559 | ) | (79,957 | ) | (331,250 | ) | ||||||||
Redemption fee | 11 | 22 | ||||||||||||||
Net increase (decrease) | (81,853 | ) | $ | (363,310 | ) | 157,968 | $ | 716,457 | ||||||||
Shares Outstanding: | ||||||||||||||||
Beginning of period | 1,002,424 | 844,456 | ||||||||||||||
End of period | 920,571 | 1,002,424 |
From time to time, the Funds may have a concentration of shares held by controlling persons. A control person is one who owns beneficially or through controlled companies more than 25% of the voting securities of a company or acknowledges the existence of control. A person who controls a fund may be able to determine the outcome of any matter submitted to a vote of shareholders. As of December 31, 2010, one foundation may be deemed to be a controlling person in the Aquinas Value Fund.
D. Security Transactions: Purchases and sales of investment securities, other than short-term investments, for the year ended December 31, 2010 were as follows:
Purchases | Sales | |||||||||||||||
U.S. | U.S. | |||||||||||||||
Government | Other | Government | Other | |||||||||||||
LKCM Aquinas Value Fund | $ | — | $ | 10,633,631 | $ | — | $ | 13,882,488 | ||||||||
LKCM Aquinas Growth Fund | — | 13,155,709 | — | 22,284,631 | ||||||||||||
LKCM Aquinas Small Cap Fund | — | 4,255,665 | — | 4,834,850 |
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E. Tax Information: At December 31, 2010, the components of accumulated earnings (losses) on a tax basis were as follows:
LKCM | LKCM | LKCM | ||||||||||
Aquinas | Aquinas | Aquinas Small | ||||||||||
Value Fund | Growth Fund | Cap Fund | ||||||||||
Cost of Investments | $ | 30,173,798 | $ | 23,275,498 | $ | 5,053,552 | ||||||
Gross Unrealized Appreciation | $ | 8,697,748 | $ | 8,028,195 | $ | 1,617,496 | ||||||
Gross Unrealized Depreciation | (461,570 | ) | (97,436 | ) | (53,137 | ) | ||||||
Net Unrealized Appreciation | $ | 8,236,178 | $ | 7,930,759 | $ | 1,564,359 | ||||||
Undistributed Ordinary Income | $ | — | $ | — | $ | — | ||||||
Undistributed Long-Term Capital Gain | — | — | — | |||||||||
Total Distributable Earnings | $ | — | $ | — | $ | — | ||||||
Other Accumulated Losses | $ | (872,309 | ) | $ | (338,383 | ) | $ | (393,807 | ) | |||
Total Accumulated Gains | $ | 7,363,869 | $ | 7,592,376 | $ | 1,170,552 |
The difference between book-basis and tax-basis unrealized appreciation is attributable primarily to the tax deferral of losses on wash sales and partnership adjustments.
At December 31, 2010 the accumulated capital loss carryforwards were as follows:
LKCM | LKCM | LKCM | ||||||||||
Aquinas | Aquinas | Aquinas Small | ||||||||||
Value Fund | Growth Fund | Cap Fund | ||||||||||
Expiring in 2017 | $ | 872,309 | $ | 338,383 | $ | 393,807 |
To the extent the Funds realize future net capital gains, taxable distributions will be reduced by any unused capital loss carryforwards as permitted by the Internal Revenue Code. During the year ended December 31, 2010, the LKCM Aquinas Value, LKCM Aquinas Growth Fund and LKCM Aquinas Small Cap Fund utilized capital loss carryforwards of $1,857,731, $3,577,347 and $674,032, respectively.
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the “RIC Act”) was enacted. The RIC Act modernizes several of the federal income and excise tax provisions related to regulated investment companies (“RICs”). Under the RIC Act, new capital losses may be carried forward indefinitely, with the character of the original loss retained. The RIC Act also contains simplification provisions, which are aimed at preventing disqualification of a RIC for inadvertent failures to comply with asset diversification and/or qualifying income tests. The RIC Act exempts RICs from the preferential dividend rule and repealed the 60-day designation requirement for certain types of pay-through income and gains. In addition, the RIC Act contains provisions aimed at preserving the character of distributions made by a fiscal year RIC during the portion of its taxable year ending after October 31 or December 31. Except for the simplification provisions related to RIC qualification, the RIC Act is effective for taxable years beginning after December 22, 2010. Management is currently evaluating the implications of the RIC Act, if any, and the impact on the Funds’ financial statements is currently being assessed.
The tax components of dividends paid during the periods shown below were as follows:
Year Ended December 31, 2010 | Year Ended December 31, 2009 | |||||||||||||||
Ordinary | Long-Term | Ordinary | Long-Term | |||||||||||||
Income | Capital Gain | Income | Capital Gain | |||||||||||||
LKCM Aquinas Value Fund | $ | 18,215 | — | $ | 50,327 | — | ||||||||||
LKCM Aquinas Growth Fund | — | — | — | — | ||||||||||||
LKCM Aquinas Small Cap Fund | — | — | — | — |
The Trust has adopted financial reporting rules regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The Trust has reviewed all open tax years and major jurisdictions and concluded that there is no impact on the Funds’ financial position or results of operations. Tax years that remain open to examination by major tax jurisdictions include tax years ended December 31, 2007 through December 31, 2010. There is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on tax returns as of December 31, 2010. The Funds are also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. If applicable, the Funds would recognize interest accrued related to unrecognized tax benefits in “interest expenses” and penalties in “other expenses” on the statement of operations.
26
Report of Independent Registered Public Accounting Firm |
To the Shareholders and Board of Trustees of LKCM Funds:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of LKCM Aquinas Value Fund, LKCM Aquinas Growth Fund, and LKCM Aquinas Small Cap Fund, three of the portfolios constituting the LKCM Funds (collectively, the “Funds”), as of December 31, 2010, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the year ended December 31, 2006 were audited by other auditors whose report, dated February 20, 2007, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the three portfolios (listed in the first paragraph) of the LKCM Funds as of December 31, 2010, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended in conformity with accounting principles generally accepted in the United States of America.
Milwaukee, Wisconsin
February 28, 2011
27
LKCM Funds |
Additional Information |
December 31, 2010
Tax Information: The Funds designated the following percentages of dividends declared from net investment income for the fiscal year ended December 31, 2010 as qualified dividend income under the Jobs & Growth Tax Relief Reconciliation Act of 2003.
Value | 100.00% |
The Funds designated the following percentages of dividends declared during the fiscal year ended December 31, 2010 as dividends qualifying for the dividends received deduction available to corporate shareholders.
Value | 100.00% |
Additional Information Applicable to Foreign Shareholders Only: The Funds hereby designate the following percentages of their ordinary income distributions for the fiscal year as interest-related dividends under Internal Revenue Code Section 871(k)(1)( C ).
Value | 0.52% |
The Funds had no taxable ordinary income distributions that were designated as short-term capital gain distributions under Internal Revenue Code Section 871(k)(2)(C) during the year ended December 31, 2010.
Availability of Proxy Voting Information: A description of the policies and procedures that the Funds use to determine how to vote proxies relating to their portfolio securities, as well as the proxy voting record, is available without charge, upon request, by calling toll-free 1-800-423-6369 or on the SEC website at http://www.sec.gov. The actual voting records relating to portfolio securities during the twelve month periods ended June 30 (as filed with the SEC on Form N-PX) are available without charge, upon request, by calling the Funds toll free at 1-800-423-6369 or by accessing the SEC’s website at www.sec.gov.
Availability of Quarterly Portfolio Schedule: The Funds’ are required to file complete schedules of portfolio holdings with the SEC for the first and third fiscal quarters on Form N-Q. Once filed, the Funds’ Form N-Q is available without charge upon request on the SEC’s website (http://www.sec.gov) and may be available by calling 1-800-423-6369. You can also obtain copies of Form N-Q by (i) visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330); (ii) sending your request and a duplicating fee to the SEC’s Public Reference Room, Washington, DC 20549; or (iii) sending your request electronically to publicinfosec.gov.
28
Information about the Funds’ Trustees:
The business and affairs of the Funds are managed under the direction of the Funds’ Board of Trustees. Information pertaining to the Trustees of the Funds is set forth below. The Statement of Additional Information includes additional information about the Funds’ Trustees and officers and is available, without charge, upon request by calling 1-800-423-6369.
Term of | Number of | ||||
Office & | Portfolios in | ||||
Position(s) | Length | Fund Complex | Other | ||
Name, Address | Held with | of Time | Principal Occupation | Overseen | Directorships |
and Age | the Trust | Served(1) | During Past Five Years | by Trustee | Held by Trustee |
Disinterested Trustees: | |||||
H. Kirk Downey | Chairman of | Since 2005 | President and CEO, Texas | 8 | Non-Executive Chairman |
301 Commerce Street | the Board | Systems, LLC and CEO, Texas | of the Board of AZZ | ||
Suite 1600 | of Trustees | learning systems LLC since 1999; | Incorporated, | ||
Fort Worth, TX 76102 | Dean, M.J. Neeley School of | a manufacturing | |||
Age: 68 | Trustee | Since 1994 | Business, Texas Christian University | company. | |
Business School from 1987 to 1999. | |||||
Earle A. Shields, Jr. | Trustee | Since 1994 | Consultant; formerly Consultant | 8 | Priests Pension Fund |
301 Commerce Street | for NASDAQ Corp. and Vice | of the Catholic Diocese | |||
Suite 1600 | President, Merrill Lynch & Co., Inc. | of Fort Worth, Lay | |||
Fort Worth, TX 76102 | Workers Pension Fund | ||||
Age: 90 | of the Catholic Diocese | ||||
of Fort Worth, St. Joseph | |||||
Health Care Trust, Catholic | |||||
Schools Trust and Catholic | |||||
Foundation of North Texas. | |||||
Richard J. Howell | Trustee | Since 2005 | CPA, Adjunct Faculty at SMU | 8 | Red Robin Gourmet |
301 Commerce Street | Cox School of Business from | Burgers, Inc. | |||
Suite 1600 | Chairman of | Since 2008 | 2004 to 2009; Consulting Services, | ||
Fort Worth, TX 76102 | the Audit and | since 2002; Audit Partner, Arthur | |||
Age: 68 | Compliance | Andersen LLP from 1974-2002. | |||
Committee | |||||
Interested Trustee: | |||||
J. Luther King, Jr.(2) | Trustee, | Since 1994 | Chairman, President and Director, | 8 | Employee Retirement |
301 Commerce Street | President and | Luther King Capital Management | Systems of Texas, 4K | ||
Suite 1600 | Chief Executive | Corporation since 1979. | Land & Cattle Company | ||
Fort Worth, TX 76102 | Officer | (ranching), Hunt Forest | |||
Age: 70 | Products (lumber), | ||||
Southwestern Exposition & | |||||
Livestock (livestock), | |||||
Southwest JLK | |||||
Corporation (management | |||||
company), Texas Christian | |||||
University, Texas | |||||
Southwestern Cattleraisers | |||||
Foundation (livestock) and | |||||
Tyler Technologies | |||||
(information management | |||||
company for government | |||||
agencies). |
(1) Each Trustee holds office during the lifetime of the Trust until that individual resigns, retires or is otherwise removed or replaced.
(2) Mr. King is an “interested person” of the Trust (as defined in the 1940 Act) because of his affiliation with the Adviser.
29
Term of | |||
Office & | |||
Position(s) | Length | ||
Name, Address | Held with | of Time | Principal Occupation |
and Age | the Trust | Served(1) | During Past Five Years |
Officers: | |||
J. Luther King, Jr. | President and | Since | Chairman, President and Director, Luther King Capital Management |
301 Commerce Street | Chief Executive | 1994 | Corporation since 1979. |
Suite 1600 | Officer | ||
Fort Worth, TX 76102 | |||
Age: 70 | |||
Paul W. Greenwell | Vice President | Since | Principal, Luther King Capital Management since 1986, |
301 Commerce Street | 1996 | Vice President and Portfolio Manager, Luther King Capital | |
Suite 1600 | Management since 1983. | ||
Fort Worth, TX 76102 | |||
Age: 60 | |||
Richard Lenart | Secretary and | Since | Luther King Capital Management since 2005. |
301 Commerce Street | Treasurer | 2006 | |
Suite 1600 | |||
Fort Worth, TX 76102 | |||
Age: 44 | |||
Steven R. Purvis | Vice President | Since | Principal, Luther King Capital Management since 2003, |
301 Commerce Street | 2000 | Vice President and Portfolio Manager, Luther King Capital | |
Suite 1600 | Management since 1996. | ||
Fort Worth, TX 76102 | |||
Age: 45 | |||
Jacob D. Smith | Chief | Since | Chief Financial Officer since 2010, General Counsel and Chief |
301 Commerce Street | Financial | 2010 | Compliance Officer, Luther King Capital Management since 2006, |
Suite 1600 | Officer | Enforcement Attorney, U.S. Securities and Exchange Commission | |
Fort Worth, TX 76102 | from 2005 to 2006. | ||
Age: 36 | Chief | Since | |
Compliance | 2006 | ||
Officer |
30
LKCM FUNDS
PRIVACY NOTICE
Our Commitment to Your Privacy
At LKCM Funds, we are committed to safeguarding the confidentiality and privacy of personal information about our shareholders. This privacy notice describes the policies and procedures we have implemented to protect the privacy of your personal information as well as the sources through which we may obtain personal information about you.
How We Protect Your Personal Information
Protecting your personal information is an important priority at LKCM Funds. Accordingly, we have implemented policies and procedures designed to safeguard your personal information from unauthorized access. Pursuant to these policies and procedures, we maintain various physical, electronic, and procedural safeguards to protect the security and confidentiality of your personal information, and we adapt these safeguards to respond to evolving technological and other standards.
In addition, we do not disclose any nonpublic personal information about you to nonaffiliated third parties, except as required or permitted by law or as necessary for us to carry out our responsibilities in providing services to you.
How We Obtain Your Personal Information
We collect nonpublic personal information about you from the following sources:
• Information provided by you or your representatives, whether through documentation that you or your representatives provide to us, through discussions that you or your representatives have with us, or otherwise; and
• Information arising from your account experience with us.
Please do not hesitate to contact our Chief Compliance Officer if you have any questions regarding the measures we have implemented to protect the privacy of your personal information.
Not a Part of the Annual Report.
U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
LKCM FUNDS
P.O. Box 701
Milwaukee, WI 53201-0701
Officers and Trustees | |||
J. Luther King, Jr., CFA | H. Kirk Downey | Richard Lenart | |
Trustee, | Chairman of the Board | Secretary & Treasurer | |
President | |||
Paul W. Greenwell | Richard J. Howell | Jacob D. Smith | |
Vice President | Trustee | Chief Financial Officer | |
Chief Compliance Officer | |||
Steven R. Purvis, CFA | Earle A. Shields, Jr. | ||
Vice President | Trustee | ||
Investment Adviser | |||
Luther King Capital Management Corporation | |||
301 Commerce Street, Suite 1600 | |||
Fort Worth, TX 76102 | |||
Administrator, Transfer Agent, Dividend | |||
Paying Agent & Shareholder Servicing Agent | |||
U.S. Bancorp Fund Services, LLC | |||
P.O. Box 701 | |||
Milwaukee, WI 53201-0701 | |||
Custodian | |||
U.S. Bank, N.A. | |||
1555 N. River Center Drive, Suite 302 | |||
Milwaukee, WI 53212 | |||
Independent Registered Public Accounting Firm | |||
Deloitte & Touche LLP | |||
555 E. Wells St., Suite 1400 | |||
Milwaukee, WI 53202 | |||
Distributor | |||
Quasar Distributors, LLC | |||
615 E. Michigan Street | |||
Milwaukee, WI 53202 |
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. The registrant has not made any amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report.
A copy of the registrant’s Code of Ethics is filed herewith.
Item 3. Audit Committee Financial Expert.
The registrant’s board of trustees has determined that there is at least one audit committee financial expert serving on its audit committee. Richard J. Howell is the “audit committee financial expert” and is considered to be “independent” as each term is defined in Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years. “Audit services” refer to performing an audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. “Audit-related services” refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. “Tax services” refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. “All other fees” refer to the aggregate fees billed for professional services rendered by the registrant’s prior principal accountant in connection with the transition of the engagement to the registrant’s current principal accountant. The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant.
FYE 12/31/2010 | FYE 12/31/2009 | |
Audit Fees | $133,500 | $146,500 |
Audit-Related Fees | $0 | $0 |
Tax Fees | $29,000 | $32,000 |
All Other Fees | $0 | $0 |
The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant.
The percentage of fees billed by Deloitte & Touche LLP applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows:
FYE 12/31/2010 | FYE 12/31/2009 | |
Audit-Related Fees | 0% | 0% |
Tax Fees | 0% | 0% |
All Other Fees | 0% | 0% |
All of the principal accountant’s hours spent on auditing the registrant’s financial statements were attributed to work performed by full-time permanent employees of the principal accountant.
The following table indicates the non-audit fees billed or expected to be billed by the registrant’s accountant for services to the registrant and to the registrant’s investment adviser (including any entity controlling, controlled by, or under common control with the adviser) for the last two years. The audit committee of the board of trustees has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser is compatible with maintaining the principal accountant's independence and has concluded that the provision of such non-audit services by the accountant has not compromised the accountant’s independence.
Non-Audit Related Fees | FYE 12/31/2010 | FYE 12/31/2009 |
Registrant | $29,000 | $32,000 |
Registrant’s Investment Adviser | $0 | $0 |
Item 5. Audit Committee of Listed Registrants.
Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
Item 6. Investments.
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
Item 11. Controls and Procedures.
(a) The registrant’s Chief Executive Officer and Chief Financial Officer have reviewed the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the registrant and by the registrant’s service provider.
(b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(a) | (1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Filed herewith. |
(2) A separate certification for each principal executive and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) LKCM Funds
By (Signature and Title) /s/ J. Luther King, Jr.
J. Luther King, Jr., Principal Executive Officer/President
Date March 3, 2011
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title) /s/ J. Luther King, Jr.
J. Luther King, Jr., Principal Executive Officer/President
Date March 3, 2011
By (Signature and Title) /s/ Jacob D. Smith
Jacob D. Smith, Chief Financial Officer
Date March 3, 2011