FTI
FUNDS
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
MAY 31, 1997
FTI SMALL CAPITALIZATION
EQUITY FUND
FTI INTERNATIONAL EQUITY FUND
FTI INTERNATIONAL BOND FUND
FTI GLOBAL BOND FUND
EDGEWOOD SERVICES, INC.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Edgewood Services, Inc. is the distributor of the funds
and is a subsidiary of Federated Investors.
Cusip 302927108 SCEF
Cusip 302927207 IEF
Cusip 302927306 IBF
Cusip 302927405 GBF
G01710-01 (6/97)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I'm pleased to present the Semi-Annual Report to Shareholders for the FTI Funds.
This report covers activity over the six-month period from December 1, 1996
through May 31, 1997.
First, you'll find a commentary by each Fund's portfolio manager, which covers
economic and market conditions and their impact on Fund performance and
strategy. After the commentary, there is a complete listing of each Fund's
holdings and the financial statements.
The following is a fund-by-fund summary over the reporting period.
FTI SMALL CAPITALIZATION EQUITY FUND
The Fund is managed to pursue a high level of growth through a diversified
portfolio of small-company stocks. The Fund's performance was affected by
short-term volatility in the small-capitalization market.* In this environment,
it achieved a total return of 1.16%** as the share price increased from $12.08
to $12.22 during the six-month reporting period. The Fund's net assets grew to
$25.5 million at the end of the reporting period. It's important to note that
short-term volatility is to be expected when investing in small cap stocks.
While the Fund's performance in the first half was somewhat weak, its long-term
record is highly positive. Since the Fund's inception on December 22, 1995
through May 31, 1997, it has achieved an annualized total return of 14.93%.**
FTI INTERNATIONAL EQUITY FUND
The Fund's portfolio of approximately 80 international stocks,*** in response to
a favorable international stock market environment, produced a total return of
11.91%** through $0.16 per share in income and a 10% increase in net asset
value. Assets were $34.8 million at the end of the reporting period.
FTI INTERNATIONAL BOND FUND
The Fund's bond portfolio is diversified among government and corporate bonds of
9 countries.*** During the reporting period, international bond market returns
were negatively affected by a strong U.S. dollar. As a result, the Fund's total
return of -4.84%** was consistent with the negative total return of the overall
international bond market. Over the reporting period, the Fund paid a total of
$0.22 per share in dividends. On May 31, 1997, Fund assets were $7.2 million.
* Small cap stocks have historically experienced greater volatility than
average.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
*** Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
FTI GLOBAL BOND FUND
At the end of the reporting period, the Fund was invested in government and
corporate bonds of 10 countries,*** including the U.S., to pursue its objective
of total return over the long term. As international bond returns were adversely
affected by a strong U.S. dollar, the Fund had a negative total return of
- -2.60%.** During this fiscal period, the Fund paid dividends totaling $0.45, and
capital gains totaling $0.04. Fund assets reached $1.4 million on the last day
of the reporting period.
Thank you for your pursuing your financial goals through the FTI Funds. We look
forward to keeping you up to date on the progress of your investment and
providing you with the highest level of service possible.
Sincerely,
LOGO
President
July 15, 1997
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
*** Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
FTI SMALL CAPITALIZATION EQUITY FUND
PERFORMANCE
The first half of fiscal 1997 beginning December 1, 1996 was a very volatile
time for the high growth sector of the small capitalization asset class. In the
month of December, the Fund was up in line with the Russell 2000 Index* and the
Russell 2000 Growth Index.* Then came January which had the first half of the
month going up and the second half moving down with some speed. The turn in the
market was around January 21st-22nd and the decline continued through February,
March and April. Market sentiment changed dramatically in late April and
exploded in May, and the Fund rose strongly, as did the high growth group in the
small cap sector in general. The Fund ended the first half of its fiscal year up
1.16%, while the Russell 2000 was up 8.44% and the Russell 2000 Growth Index was
up 5.23%. The value sector of the small cap asset class significantly
outperformed the growth sector during the reporting period. For the last three
months ended May 31, 1997, the Fund's relative performance was stronger than
earlier in the first half, as shown below.
<TABLE>
<CAPTION>
TOTAL RETURN ANNUAL RETURN
AS OF 5/31/97 3 MONTHS 6 MONTHS 1 YEAR SINCE INCEPTION
---------------------------- ---------- ---------- -------- -----------------------
<S> <C> <C> <C> <C>
FTI Small Capitalization
Equity Fund 6.91% 1.16%** 0.58% 14.93%
Russell 2000 Index 6.18% 8.44% 5.67% 16.62%
Russell 2000 Growth Index 5.67% 5.23% 4.61% 10.41%
</TABLE>
Inception date is 12/22/95.
* The Russell 2000 Small Stock Index is an index consisting of approximately
2000 small capitalization common stocks that can be used to compare to the
total returns of funds whose portfolios are invested primarily in small
capitalization common stocks. The Russell 2000 Growth Index is represented by
those Russell 2000 companies with higher price-to-book ratios and higher
forecasted growth rates. Indices are unmanaged and investments cannot be made
in an index.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total return would have been lower in the absence of temporary
expense waivers or reimbursements.
- --------------------------------------------------------------------------------
MARKET REVIEW
The volatility and underperformance that has characterized the high growth
sector of the small capitalization market off and on for the past eleven months
has been unusual in that it occurred during a period when the stocks were
generally undervalued. The chart below shows that the Russell 2000 is cheaper
than the S&P 500* (as measured by price to earnings ratios) on both 1997 and
1998 projected earnings and has a higher growth rate for both periods. For
example, one would pay 14.2x 1998 earnings per share to buy a company that is
growing 20.1% per year in the Russell 2000, whereas in the S&P 500 in 1998 you
would pay 16.1x 1998 earnings per share for a 13.5% growth rate.
AS OF MAY 1997:
RUSSELL 2000
1997 AND 1998
PROJECTED P/E AND EPS GROWTH
GRAPHIC REPRESENTATION `A1'' OMITTED - SEE APPENDIX.
S&P 500
1997 AND 1998
PROJECTED P/E AND EPS GROWTH
GRAPHIC REPRESENTATION `A2'' OMITTED - SEE APPENDIX.
SOURCE: INSTITUTIONAL BROKERS ESTIMATE SYSTEM
The chart on the next page shows that the P/E ratio of high growth smaller
companies generally trades in a range between one times and two times the P/E
ratio of the S&P 500. When it is one times the P/E ratio of the S&P 500, it is
extremely underpriced and at two times the P/E it is very over-priced. At the
end of May 1997, at 1.25 times the S&P 500, we believe the high growth sector
was relatively cheap and was likely to continue its market appreciation.
* The S&P 500 is an index consisting of common stocks of industrial, utility,
transportation, and financial companies in the United States market. This
index is unmanaged, and investments cannot be made in an index.
- --------------------------------------------------------------------------------
GRAPHIC REPRESENTATION `A3'' OMITTED - SEE APPENDIX.
The excessive pull-back that occurred in the small capitalization sector during
the past year was attributable more to a flight to greater liquidity than any
other cause. We believe that in the long run the higher long term growth rates
and relatively lower P/E ratios will attract more investors to the small
capitalization group than the liquidity issues will deter from the sector.
- --------------------------------------------------------------------------------
INVESTMENT OUTLOOK AND STRATEGY
We continue to have a positive long term outlook for the small capitalization
asset class. The stocks held by the Fund have been selling at a reasonable
discount to their growth rates. We continued to find plenty of companies that
offered excellent long term growth potential. We believe that the current
demographics will favorably affect the growth of new money invested in this
sector through substantial increases in retirement savings, and greater
investment diversity in these savings.
Our strategy is to focus primarily on stock selection as the key to performance.
We search for underresearched companies with excellent balance sheets, recurring
revenues, franchise value, and strong committed managements that are likely to
be paid for their performance in the stock of their company. The Fund is
invested broadly across all sectors to diversify risk, with mild overweightings
in the finance, technology and consumer areas. We believe that the Fund is
advantageously positioned to benefit from the positive forces in the U.S.
economy in the latter half of 1997.
PORTFOLIO STRUCTURE AS OF 5/31/97
GRAPHIC REPRESENTATION `A4'' OMITTED - SEE APPENDIX.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
FTI INTERNATIONAL EQUITY FUND
PERFORMANCE
The FTI International Equity Fund ended May 1997 with a net asset value ("NAV")
per share of $12.12 and total assets of $34.8 million. The investment returns
for the Fund versus the MSCI EAFE Index* are shown below. The Fund's favorable
performance relative to the index was due to the following factors: an
overweight position in Latin America, stock selection in selective European
markets, an underweight position in Japan and end gains from hedging Japanese
yen and core-European currency.
<TABLE>
<CAPTION>
TOTAL RETURN ANNUAL RETURN
AS OF 5/31/97 6 MONTHS 1 YEAR SINCE INCEPTION
----------------------------------- --------- ------- -----------------
<S> <C> <C> <C>
FTI INTERNATIONAL EQUITY FUND 11.91%** 15.20% 15.55%
MSCI EAFE (INCL. NET DIVIDENDS) 4.04% 7.54% 8.61%
Inception date is 12/22/95.
</TABLE>
* Morgan Stanley Capital International Europe, Australia, and Far East Index is
a market capitalization-weighted foreign securities index, which is widely
used to measure the performance of European, Australian and New Zealand, and
Far Eastern stock markets. This index is unmanaged and investments cannot be
made in an index. All returns herein refer to MSCI indices and are in U.S.
dollars, unless otherwise noted.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total return represents the change in the value of an
investment after reinvesting all income and capital gains.
- --------------------------------------------------------------------------------
MARKET REVIEW
International equities increased 4.0% during the first six months of the Find's
fiscal year. Central themes in international markets were a strong dollar and
strong performances from European and Latin American markets. There was a
minimal interest in Japanese equities until the end of April when investors
started to anticipate a pick-up in Japanese economic growth, thereby supporting
the Japanese equity market and sharply reversing the strength in the dollar
versus the yen.
EUROPEAN EQUITIES continued to shine this fiscal year, increasing 19.9% in local
currency, though the previously mentioned dollar strength led to smaller gains
in dollar terms (+10.9%). With fiscal policy remaining tight to comply with
Maastricht-treaty European Monetary Union ("EMU") constraints, competitively
priced exports were relied upon to spur economic growth. Elections in the U.K.
(+11.5%) and France (+1.8%) were the significant political events this year,
with the market receiving the Labour Party's U.K. victory much better than the
recent Socialist win in France (illustrating investors' dislike of surprises, as
was the case in France). Switzerland (+19.0%) and Germany (+12.2%) performed
well, as investors focused on exporters, companies undergoing U.S. style
restructuring, and traditional growth sectors such as drugs and service
companies.
JAPANESE EQUITIES were, on the other hand, quite a different story. An
anticipated economic slowdown and weakness in the banking sector contributed to
market weakness through the middle of April. In this environment, and with
further dollar strength versus the yen, the "Nifty-30" stocks, dominated by
technology and exporters, were strong performers.
Towards the end of April, a sudden shift took place, as investors took the view
that the fiscal tightening which went into effect on April 1, 1997 would have a
less negative impact on consumer spending, and subsequently, overall economic
growth. Rumors of imminent discount rate hikes and talk from Mr. Sakakibara
("Mr. Yen," because of his frequent comments on the currency) that the yen was
undervalued given the stage of Japan's economic cycle, led a sharp reversal in
the yen/dollar rate from a yen low of 127 to 115 (hitting 112 yen/$ at the
high). With expectations of stronger economic growth, the local index rallied
17.2% (in local currency) from its April low, with the "Nifty-30" stocks taking
a back seat to more domestic-oriented sectors. At this point, we still favor
technology and export stocks due to their higher earnings growth visibility and
lower P/E multiples (paradoxically, in Japan, high growth, internationally
competitive companies tend to have lower multiples, more in-line with their
competitors).
There was a marked contrast between Latin American and Asia Pacific equity
markets. LATIN AMERICAN EQUITIES (+33.5%) performed well across the board with
investors encouraged by economic growth, declining inflation trends, and
continued attempts by governments to deregulate their state dominated economies.
Brazil (+47.2%) was the strongest performer, with portfolio holdings Telebras
and Cemig representing prime examples of state companies benefiting from
deregulation and privatization.
- --------------------------------------------------------------------------------
It was much more difficult to make money in ASIA PACIFIC EQUITIES, which
declined 0.4% over the reporting period. Though starting the year poorly, Hong
Kong caught fire in recent months as worries of excessive U.S. interest rate
hikes receded. The latest rally in Hong Kong shares has been primarily fueled by
a strong residential property market and significant money flows coming into the
territory from China. As investors became more comfortable with Hong Kong post
the July 1, 1997 handover to China, demand increased for "Red Chip" stocks
(mainland China oriented companies traded in Hong Kong). Long term prospects
look strong, however, any anti-speculation moves by the new government could
take some of the froth out of a temporarily overheating market. Other markets in
the region have had to deal with country specific problems: Thailand-weak growth
and high interest rates to support the currency; Malaysia-slowing growth and
property restrictions and Korea-weak exports, bankruptcies, and governmental
scandals.
INVESTMENT OUTLOOK AND STRATEGY
The portfolio is currently positioned to take advantage of the attractive
valuations and growth prospects in Latin America. We are effectively funding
those investments from an underweighted position in Japanese equities. After
some very strong moves, we are relatively neutral towards U.K. and European
equity markets. Export growth in Europe has so far been unable to ignite the
domestic economies, thus leaving many valuations stretched versus their growth
potential. Since March, we have gradually been building up the Fund's exposure
to Japanese equities, and though valuations are generally unattractive, our
recent company research visits in Japan revealed a few interesting opportunities
for the portfolio. Asia Pacific remains a region that is very country specific
with regard to political and economic outlook. We intend to continue to focus on
Hong Kong equities, investing selectively in Singapore, Malaysia, and Korea.
FTI INTERNATIONAL EQUITY FUND--MAY 31, 1997
- --------------------------------------------------------------------------------
REGIONAL ALLOCATION
GRAPHIC REPRESENTATION `A5'' OMITTED - SEE APPENDIX.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED)
<S> <C>
GRAPHIC REPRESENTATION `A6'' OMITTED - SEE APPENDIX.
</TABLE>
SECTOR ALLOCATION
GRAPHIC REPRESENTATION `A7'' OMITTED - SEE APPENDIX.
GRAPHIC REPRESENTATION `A8'' OMITTED - SEE APPENDIX.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
FTI INTERNATIONAL BOND FUND
FTI GLOBAL BOND FUND
PERFORMANCE
The FTI International Bond Fund and FTI Global Bond Fund ended May 1997 with
NAV's per share of $9.50 and $9.67, respectively. The total returns for the
Funds versus the Salomon World Bond Indices* are shown below. While foreign
markets produced superior returns to the U.S. in local currency terms, the
soaring U.S. dollar was responsible for turning modest gains into sizeable
losses. For the six months ended May 31, 1997, the FTI International Bond Fund
and the FTI Global Bond Fund underperformed their benchmarks by 0.44% and 0.10%,
respectively. This was due to the fact that the Fund's expenses more than offset
the effect of two factors: 1) overweighted positions in U.K. and Australian bond
markets; and 2) the hedging of a portion of the portfolio's currency exposure
into dollars, which given the weakness in foreign currencies, produced gains for
the Funds.
<TABLE>
<S> <C> <C> <C>
TOTAL RETURN ANNUAL RETURN
AS OF 5/31/97 6 MONTHS 1 YEAR SINCE INCEPTION
------------------------------ ---------- -------- -----------------
FTI INTERNATIONAL BOND FUND (4.84%)** 0.22% (0.89%)
SALOMON BROTHERS NON-U.S.
DOLLAR WORLD GOVERNMENT BOND
INDEX (4.40%) 1.20% (0.50%)
Inception date is 12/22/95.
1 ANNUAL RETURN
6 MONTHS YEAR --- SINCE INCEPTION
---------- -----------------
FTI GLOBAL BOND FUND (2.60%)** 3.95% 1.58%
SALOMON BROTHERS WORLD
GOVERNMENT BOND INDEX (2.50%) 3.30% 0.70%
Inception date is 12/22/95.
</TABLE>
* Salomon Brothers Non-U.S. Dollar World Government Bond Index. The indices of
nonbase currency sectors exclude respective base currency bond markets from
the calculation and, in turn, are stated in terms of the base currency. The
index includes the following countries: Australia, Belgium, Canada, Denmark,
France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, the United
Kingdom and the United States (collectively, the "WBGI Countries").
Therefore, the Non-U.S. Dollar World Government Bond Index includes all WGBI
Countries, except the United States, and is stated in U.S. dollar terms.
Salomon Brothers World Government Bond Index is a market
capitalization-weighted index consisting of government bond markets of the
WGBI Countries. Indices are unmanaged and investments cannot be made in an
index.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total return represents the change in the value of an
investment after reinvesting all income and capital gains.
- --------------------------------------------------------------------------------
MARKET REVIEW
The predominant themes in the global fixed income markets over the past six
months have been the continued benign inflation backdrop, which has allowed
Central banks to tolerate periods of above trend growth without "taking the
punch bowl away," the march (at times unsteady) towards European Monetary Union
("EMU"), and the playing out of the endgame of the cyclical appreciation of the
dollar.
It is remarkable that, in the seventh year of expansion, the U.S. economy has
yet to generate much in the way of inflationary pressures, and indeed recent
data show inflation to have fallen to 2.5%, a new low for this cycle. This is
especially remarkable given record levels of stock prices and consumer
confidence, and low levels of unemployment. The absence of inflation has led
many to declare a new era of stable and permanently low inflation, as new
technologies, global competition and job insecurity have combined to stimulate
growth without inflation. While the reality of low inflation causes us to
believe in some kind of "paradigm shift," these factors, if they persist, would
affect long term rates of growth and inflation. In other words, the business
cycle is not dead, but rather its nature continues to change. It is the business
cycle, the ebb and flow of consumer demand and investment, which should continue
to dominate growth and inflation in the short-to-medium term.
The longer inflation has remained under control, the more converts to
"new-paradigm thinking" there have been. The real test for this theory is likely
to come over the next eighteen months which are likely to see the fastest rates
of global growth in a decade. Until recently, subdued global growth acted as a
shock absorber for above trend U.S. growth, but as global economic activity
revives in response to record low short term interest rates, the shock absorber
will disappear. Bond markets have apparently accepted this thinking, and have
happily absorbed the plentifully available liquidity.
The dollar has been in a cyclical upswing for almost two years, largely a
function of differential in growth and interest rates with its trading partners.
With other economies at much earlier phases of the economic cycle than the U.S.,
rates of U.S. growth (and eventually interest rates) may begin to favor foreign
currencies. The recent deterioration of the U.S. trade balance is a further
indication that further dollar gains could be difficult to achieve. From a peak
of 127 yen, the dollar has fallen by more than 10% in less than two months, but
has been relatively stable against the Mark as EMU concerns have reduced the
attractiveness of European currencies. We have increased yen weightings from low
levels at the beginning of the year, and have reduced dollar exposures somewhat.
In Europe, the key "core" countries, France and Germany, governments are
surprisingly discovering that meeting the Maastricht criteria for EMU
qualification is proving much more difficult than expected, as anemic domestic
demand has put upward pressure on fiscal deficits. In Germany, the finance
minister attempted a transfer to the government budget of the profit from the
revaluation of Central Bank gold reserves, before being forced into a
humiliating climbdown. In France, President Chirac called a snap election, which
led to a defeat of the right wing government at the hands of a
Socialist/Communist coalition. The new government seems unlikely to take "real"
action to bring the deficit back in line with the Maastricht targets, but may be
inclined to use "smoke-and-mirrors" or else accept a deficit close to target
rather than one at or below target. These events increase the likelihood both of
a delay in the project or of a more broad-based
- --------------------------------------------------------------------------------
EMU than originally envisaged by the "core" countries. Apart from some short
term volatility, there has been a remarkably muted reaction by markets to date.
The U.K. market has been the star performer within Europe, as the incoming
Labour administration took the unexpected step of granting the Bank of England
independence in setting interest rates leading to a sizable rally in bond prices
(4.5% in one day).
INVESTMENT OUTLOOK AND STRATEGY
Over the coming months, the fate of EMU should be closer to a resolution. With
the risk premium between German and other European markets almost eliminated on
long term bonds (with the notable exception of the U.K.), we have increased
German bond weightings at the expense of other European positions. Outside
Germany, exposures are in longer term U.K. issues, where credible monetary
policy and fiscally conservative policies should lead to strong performance, and
which should continue to be a safe haven during times of EMU turbulence, and
also in shorter term Italian bonds, where favorable inflation data and weak
growth should pave the way for interest rate cuts. Within the dollar block, the
Australian and New Zealand markets are attractive where real yields are high,
and growth is anemic, while the U.S. market looks vulnerable to any data that
may lead the Federal Reserve Board to raise rates before year end. Accordingly,
we remain underweighted in our duration exposure. The revival in Japanese growth
has caused us to increase yen exposures, which we intend to continue to increase
at the expense of the dollar and European currency exposures.
GRAPHIC REPRESENTATION `A9'' OMITTED - SEE APPENDIX.
GRAPHIC REPRESENTATION `A10'' OMITTED - SEE APPENDIX.
FTI SMALL CAPITALIZATION EQUITY FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--96.7%
AEROSPACE & DEFENSE--1.2%
10,000 AAR Corp. $ 310,000
-----------
AUCTION HOUSE--0.7%
12,000 Sothebys Holdings, Inc., Class
A 186,000
-----------
BANKING--1.6%
18,000 Security Bank Holding Co. 212,625
6,500 Texas Regional Bancshares,
Inc., Class A 203,125
-----------
Total 415,750
-----------
BROADCASTING--0.6%
24,000 (a)Medialink Worldwide, Inc. 156,000
-----------
BUILDING PRODUCTS--1.0%
30,000 (a)Morgan Products, Ltd. 266,250
-----------
COMMERCIAL SERVICES--9.6%
6,500 (a)Caribiner International,
Inc. 420,875
7,400 (a)Cohr, Inc. 119,325
9,000 (a)Consolidated Graphics, Inc. 307,125
20,600 (a)Core, Inc. 167,375
5,000 G & K Services, Inc., Class A 163,750
10,000 (a)On Assignment, Inc. 381,250
10,500 Paychex, Inc. 385,875
16,000 (a)Prepaid Legal Services, Inc. 323,000
3,000 (a)Quintiles Transnational
Corp. 187,500
-----------
Total 2,456,075
-----------
COMPUTER SERVICES--5.4%
8,800 (a)BDM International, Inc. 228,800
11,000 (a)Bisys Group, Inc. 419,375
8,000 (a)DST Systems, Inc. 246,000
12,000 Jack Henry & Associates, Inc. 268,500
8,300 (a)Sykes Enterprises, Inc. 206,463
-----------
Total 1,369,138
-----------
COMPUTER SOFTWARE--10.4%
10,500 (a)Aspen Technologies, Inc. 401,625
5,000 (a)CBT Group PLC, ADR 272,500
30,500 (a)Crystal Systems Solutions 724,375
8,000 (a)HNC Software 264,000
33,100 (a)ISG International Software
Group Ltd. 397,200
30,000 (a)OrCAD, Inc. 270,000
3,000 (a)Peoplesoft, Inc. 155,250
15,000 (a)UOL Publishing, Inc. 172,500
-----------
Total 2,657,450
-----------
<CAPTION>
SHARES VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
COMPUTERS--1.8%
5,000 (a)Electronics for Imaging,
Inc. $ 199,375
6,000 (a)Transaction Systems
Architects, Inc., Class A 252,000
-----------
Total 451,375
-----------
CONSULTING SERVICES--3.2%
5,000 (a)Cambridge Technology
Partners, Inc. 152,500
9,000 (a)META Group, Inc. 204,750
10,700 (a)Metzler Group, Inc. 251,450
8,800 (a)Whitmann-Hart, Inc. 228,800
-----------
Total 837,500
-----------
EDUCATION--2.5%
6,200 Strayer Education, Inc. 203,050
16,000 (a)DeVRY, Inc. 442,000
-----------
Total 645,050
-----------
ELECTRONIC SOFTWARE
COMPONENTS--0.4%
9,000 (a)Macrovision Corp. 113,625
-----------
ENVIRONMENTAL CONTROL--1.9%
11,000 (a)Tetra Tech, Inc. 220,000
8,100 (a)U.S. Filter Corp. 255,150
-----------
Total 475,150
-----------
FINANCIAL SERVICES--9.5%
14,800 (a)AmeriTrade Holding Corp.,
Class A 207,200
20,000 (a)Americredit Corp. 375,000
6,300 Charter One Financial, Inc. 295,312
21,000 Dime Community Bancorp, Inc. 364,875
4,300 (a)Nationwide Financial
Services, Inc., Class A 120,938
15,000 (a)Ocwen Asset Investment Corp. 271,875
6,000 Penncorp Financial Group, Inc. 204,750
6,000 TCF Financial Corp. 255,000
20,500 (a)Ugly Duckling Corp. 338,250
-----------
Total 2,433,200
-----------
FOOD & BEVERAGE--1.2%
10,000 (a)Suiza Foods Corp. 298,750
-----------
FUNERAL SERVICES--1.1%
12,000 (a)Equity Corporation
International 288,000
-----------
</TABLE>
FTI SMALL CAPITALIZATION EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
HEALTHCARE--6.9%
6,000 (a)AmeriSource Health Corp.,
Class A $ 255,750
16,000 (a)Covance, Inc. 298,000
9,800 (a)Curative Technologies, Inc. 272,563
34,400 (a)Gentle Dental Service Corp. 167,700
42,400 Matritech, Inc. 307,400
14,000 (a)Neoprobe Corp. 211,750
6,000 (a)Pediatrix Medical Group 238,500
-----------
Total 1,751,663
-----------
INSURANCE--6.3%
15,000 AmVestors Financial Corp. 264,375
4,400 Berkley, W. R. Corp. 228,250
7,500 Executive Risk, Inc. 390,938
2,500 (a)Markel Corp. 310,000
4,000 SunAmerica, Inc. 189,000
2,400 Transatlantic Holdings, Inc. 215,100
-----------
Total 1,597,663
-----------
MANUFACTURING--10.3%
6,400 (a)ASM Lithography Holding NV,
ADR 334,400
12,000 (a)Altron, Inc. 199,500
3,010 (a)Berg Electronics Corp. 104,597
5,500 Borg-Warner Automotive, Inc. 268,125
15,000 (a)Burr Brown Corp. 470,625
4,000 (a)Coherent, Inc. 175,000
7,700 (a)Electro Scientific
Industries, Inc. 292,600
14,000 (a)In Focus Systems, Inc. 364,000
15,000 (a)Larson Davis, Inc. 129,375
18,000 TB Wood's Corp. 281,250
-----------
Total 2,619,472
-----------
MEDICAL SUPPLIES--2.2%
15,400 (a)American Oncology Resources,
Inc. 217,525
6,900 (a)Lincare Holdings, Inc. 269,100
3,000 (a)Sola International, Inc. 85,875
-----------
Total 572,500
-----------
OIL--3.4%
5,000 (a)BJ Services Co. 276,250
17,000 (a)Transmontaigne Oil Co. 293,250
2,000 Transocean Offshore, Inc. 138,000
<CAPTION>
SHARES VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
OIL (continued)
4,500 (a)Trico Marine Services, Inc. $ 168,750
-----------
Total 876,250
-----------
PHARMACEUTICALS--2.8%
100,000 (a)Boston Life Sciences, Inc. 56,250
7,500 (a)Incyte Pharmaceuticals, Inc. 491,250
9,500 (a)Interneuron Pharmaceuticals 154,375
-----------
Total 701,875
-----------
REAL ESTATE--2.5%
14,500 (a)Cornerstone Properties, Inc. 219,312
15,100 (a)Grubb & Ellis Co. 147,225
12,000 Patriot American Hospitality,
Inc. 259,500
-----------
Total 626,037
-----------
RECREATION--2.0%
18,000 (a)Family Golf Centers, Inc. 501,750
-----------
RETAIL--2.0%
15,400 (a)Amazon.com, Inc. 277,200
5,000 Tiffany & Co. 231,875
-----------
Total 509,075
-----------
SECURITIES--1.3%
6,000 Jefferies Group, Inc. 323,250
-----------
TELECOMMUNICATIONS--0.9%
29,000 (a)Metro One Telecommunications 224,750
-----------
TRANSPORTATION--4.0%
10,000 Caliber System, Inc. 320,000
10,000 (a)Genesee & Wyoming, Inc.,
Class A 265,000
10,000 (a)Heartland Express, Inc. 217,500
6,000 (a)Wisconsin Central
Transportation Corp. 216,750
-----------
Total 1,019,250
-----------
TOTAL COMMON STOCKS (identified
cost $22,145,528) 24,682,848
-----------
(B)REPURCHASE AGREEMENT--5.0%
$ 1,287,000 J.P. Morgan & Co., Inc., 4.50%,
dated 5/30/1997, due 6/2/1997
(at amortized cost) 1,287,000
-----------
TOTAL INVESTMENTS (identified
cost $23,432,528)(c) $25,969,848
==========
</TABLE>
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(c) The cost of investments for federal tax purposes amounts to $23,432,528. The
net unrealized appreciation of investments on a federal tax basis amounts to
$2,537,320 which is comprised of $3,664,225 appreciation and $1,126,905
depreciation at May 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($25,515,354) at May 31, 1997.
The following acronyms are used throughout this portfolio:
ADR -- American Depository Receipt
PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements)
FTI INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--88.0%
ARGENTINA--3.3%
65,500 Banco de Galicia y Buenos Aires
S.A. de C.V., Class B $ 432,516
7,700 (a)Disco S.A., ADR 259,875
8,300 (a)Telecom Argentina S.A., ADR 443,013
-----------
TOTAL ARGENTINA 1,135,404
-----------
AUSTRALIA--0.2%
13,900 Westpac Banking Corp., Sydney 75,487
-----------
BRAZIL--5.1%
9,600 (a)Companhia Energetica de
Minas Gerais, ADR 435,445
13,200 Companhia Siderurgica Nacional,
ADR 434,885
5,300 Telecomunicacoes Brasileiras,
S.A., ADR 728,088
4,700 (a)Unibanco Uniao de Bancos
Brasileiros, S.A., ADR 162,150
-----------
TOTAL BRAZIL 1,760,568
-----------
DENMARK--1.1%
12,000 ISS International Service,
Class B 398,200
-----------
FINLAND--2.1%
6,600 KCI Konecranes 249,937
16,500 Metra OY, Class B 467,831
-----------
TOTAL FINLAND 717,768
-----------
FRANCE--5.7%
6,200 AXA 370,952
8,400 Lagardere S.C.A. 246,999
6,000 (a)SGS-Thomson Microelectronics
N.V. 487,514
14,100 Scor S.A. 568,923
3,327 Total S.A.-B 304,204
-----------
TOTAL FRANCE 1,978,592
-----------
GERMANY-4.1%
1,900 Adidas AG 199,549
36,900 Deutsche Lufthansa AG 587,472
2,400 Siemens AG 135,271
8,700 Veba AG 491,732
-----------
TOTAL GERMANY 1,414,024
-----------
HONG KONG--3.2%
4,400 (a)Asia Satellite
Telecommunications Holdings
Ltd., ADR 121,550
11,272 HSBC Holdings PLC 341,862
<CAPTION>
SHARES VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
HONG KONG (continued)
221,651 Mandarin Oriental International
Ltd. $ 250,466
131,000 (a)New World Infrastructure 408,292
-----------
TOTAL HONG KONG 1,122,170
-----------
INDONESIA--0.7%
7,700 (a)PT TeleKom, Class CS, ADR 256,025
-----------
IRELAND--2.8%
57,458 Bank of Ireland 623,162
7,900 (a)Elan Corp. PLC, ADR 321,925
1,700 (a)Ryanair Holdings PLC, ADR 42,288
-----------
TOTAL IRELAND 987,375
-----------
ITALY--3.1%
64,100 Banca Pop Di Milano 344,247
75,500 Fiat SPA 247,515
160,600 (a)Telecom Italia Mobile 471,057
-----------
TOTAL ITALY 1,062,819
-----------
JAPAN--15.9%
33,000 Aiwa Co. Ltd. 612,108
31,000 Canon, Inc. 785,316
6,400 Circle K Japan Co. Ltd. 341,297
1,210 Keyence Corp. 174,564
32,000 (a)Matsushita Electric
Industrial Co. 601,803
95,000 Mitsubishi Heavy Industries
Ltd. 683,641
12,000 Murata Manufacturing Co. Ltd. 475,054
6,000 Rohm Co 623,444
8,000 Sony Corp. 673,937
33,000 (a)Sumitomo Trust & Banking 291,885
15,000 Yamatake-Honeywell 282,095
-----------
TOTAL JAPAN 5,545,144
-----------
KOREA--0.9%
34,106 (a)SK Telecom Co. Ltd., ADR 315,481
-----------
MALAYSIA--2.1%
23,000 Malayan Banking Berhad 242,568
58,000 Perusahaan Otomobil Nasional
BHD 302,384
24,000 United Engineers Ltd. 193,895
-----------
TOTAL MALAYSIA 738,847
-----------
MEXICO--4.4%
41,300 Apasco S.A. de CV 269,972
12,600 Coca-Cola Femsa S.A., ADR 508,725
170,000 (a)Grupo Financiero Banamex
Accivel, Class B 367,986
13,600 PanAmerican Beverage, Class A 394,400
-----------
TOTAL MEXICO 1,541,083
-----------
</TABLE>
FTI INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
NETHERLANDS--6.3%
5,535 Ahold N.V. $ 420,055
3,600 Akzo Nobel N.V. 478,814
13,197 (a)ING Groep, N.V. 582,796
2,630 Nutricia Verenigde Bedrijven
N.V. 409,582
6,600 PolyGram N.V. 311,033
-----------
TOTAL NETHERLANDS 2,202,280
-----------
NEW ZEALAND--0.3%
5,600 (a)Tranz Rail Holdings Ltd.,
ADR 97,300
-----------
PORTUGAL--1.3%
11,900 Portugal Telecom S.A., ADR 458,150
-----------
SINGAPORE--0.6%
30,000 Overseas Union Bank Ltd. 205,551
-----------
SPAIN--4.2%
5,800 Banco Santander 494,701
29,000 Iberdrola S.A. 356,081
8,800 Repsol S.A. 368,290
9,300 Vallehermosa S.A. 234,816
-----------
TOTAL SPAIN 1,453,888
-----------
SWEDEN--0.9%
16,000 Sparbanken Sverige 313,758
-----------
SWITZERLAND--4.4%
770 Clariant AG 489,269
416 Novartis AG 563,909
28 (a)Roche Holding AG 248,687
16,700 (a)TAG Heuer International
S.A., ADR 237,975
-----------
TOTAL SWITZERLAND 1,539,840
-----------
<CAPTION>
SHARES VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
UNITED KINGDOM--15.3%
36,000 Argos PLC $ 361,001
22,484 British Aerospace 457,183
39,656 (a)British Petroleum Co. PLC 473,563
45,000 Compass Group 502,045
27,231 Electrocomponents PLC 177,739
48,000 Hays PLC 439,719
78,520 Lloyds TSB Group PLC 789,631
33,000 Reed International PLC 324,440
152,000 Rentokil Initial PLC 586,815
26,000 Reuters Holdings PLC 291,772
28,237 Siebe PLC 444,365
27,061 Smithkline Beecham Corp. 465,256
-----------
TOTAL UNITED KINGDOM 5,313,529
-----------
TOTAL COMMON STOCKS (identified
cost $27,286,935) 30,633,283
-----------
PREFERRED STOCKS--1.1%
GERMANY--1.1%
1,800 Fresenius AG (identified cost
$363,791) 398,104
-----------
CORPORATE BONDS--0.8%
UNITED KINGDOM--0.8%
59,000 British Airways Capital, Conv.
Bond, 9.75%, 6/15/2005
(identified cost $233,705) 290,039
-----------
(B)REPURCHASE AGREEMENT--10.4%
$ 3,629,000 J.P. Morgan & Co., Inc., 4.50%,
dated 5/30/1997, due 6/2/1997
(at amortized cost) 3,629,000
-----------
TOTAL INVESTMENTS (identified
cost $31,513,431)(c) $34,950,426
==========
</TABLE>
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(c) The cost of investments for federal tax purposes amounts to $31,513,431. The
net unrealized appreciation of investments on a federal tax basis amounts to
$3,436,995 which is comprised of $3,970,587 appreciation and $533,592
depreciation at May 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($34,817,455) at May 31, 1997.
The following acronyms are used throughout this portfolio:
ADR -- American Depository Receipt
PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements)
FTI INTERNATIONAL BOND FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN
CURRENCY
PAR AMOUNT
OR VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS--6.7%
GERMANY--3.5%
FINANCE--3.5%
180,000,000 (a)Bayerische Landesbank
Girozentrale, Unsub., 7.50%,
2/11/1999 $ 107,705
20,600,000 (b)Deutsche Siedlungs LB,
Deb., 8.75%, 10/14/1998 148,343
-----------
TOTAL GERMANY 256,048
-----------
JAPAN--1.2%
FINANCE--1.2%
10,000,000 Export-Import Bank Japan,
Foreign Gov't. Guarantee,
2.875%, 7/28/2005 87,591
-----------
SWEDEN--2.0%
FINANCE--2.0%
1,000,000 Statens Bostads,
10.25%, 5/5/2000 143,788
-----------
TOTAL CORPORATE BONDS
(identified cost $528,431) 487,427
-----------
GOVERNMENT AGENCIES--58.0%
AUSTRALIA--5.9%
194,000 Australian Government, 10.00%,
10/15/2002 168,101
68,000 Australian Government, 10.00%,
2/15/2006 60,209
115,000 (c) Treasury Corp. of
Victoria, Local Gov't.
Guarantee, 8.75%,
7/9/2003 198,706
-----------
TOTAL AUSTRALIA 427,016
-----------
CANADA--2.2%
100,000 (d) Ontario, Province of, Sr.
Unsub. Deb., 6.875%,
9/15/2000 161,132
-----------
DENMARK--1.9%
820,000 Kingdom of Denmark, 8.00%,
3/15/2006 139,138
-----------
GERMANY--18.2%
100,000 Bundesschatzanweisungen,
3.50%, 12/18/1998 58,499
240,000 Deutsche Bundespost, (German
Post Office), 7.50%,
12/2/2002 155,815
<CAPTION>
FOREIGN
CURRENCY
PAR AMOUNT
OR VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
------------------------------------------------------
<C> <S> <C>
GOVERNMENT AGENCIES
(continued)
GERMANY (continued)
290,000 Germany (Fed Republic),
5.875%, 5/15/2000 $ 177,791
1,035,000 Germany (Fed Republic), 6.00%,
1/5/2006 612,364
100,000 Germany (Fed Republic), 8.00%,
7/22/2002 66,438
130,000 Germany Unity Fund, 8.00%,
1/21/2002 85,929
240,000 Treuhandanstalt, 7.125%,
1/29/2003 153,667
-----------
TOTAL GERMANY 1,310,503
-----------
ITALY--11.1%
1,300,000,000 Buoni Poliennali Del Tes,
(Italian Government), Deb.,
10.50%, 7/15/1998 795,904
-----------
JAPAN--4.5%
15,000,000 Japan-186, 3.20%, 3/20/2006 134,388
20,000,000 World Bank, Unsub., 4.50%,
6/20/2000 186,668
-----------
TOTAL JAPAN 321,056
-----------
NEW ZEALAND--4.8%
458,000 New Zealand, (Government),
10.00%, 3/15/2002 348,990
-----------
UNITED KINGDOM--5.5%
115,000 (e) European Investment Bank,
Sr. Unsub. Deb., 8.00%,
6/10/2003 193,109
16,000 United Kingdom Treasury,
8.00%, 12/7/2015 28,071
10,000 United Kingdom Treasury,
7.00%, 11/6/2001 16,323
94,000 United Kingdom Treasury,
7.50%, 12/7/2006 156,606
-----------
TOTAL UNITED KINGDOM 394,109
-----------
UNITED STATES--3.9%
470,000 (f) Tennessee Valley
Authority, Bond, 6.375%,
9/18/2006 281,324
-----------
TOTAL GOVERNMENT AGENCIES
(identified cost $4,290,913) 4,179,172
-----------
</TABLE>
FTI INTERNATIONAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
PRINCIPAL DOLLARS
AMOUNT
------------------------------------------------------
<C> <S> <C>
(G) REPURCHASE AGREEMENT--36.5%
$2,629,000 J.P. Morgan & Co., Inc.,
4.50%, dated 5/30/1997, due
6/2/1997 (at amortized cost) $ 2,629,000
-----------
TOTAL INVESTMENTS (identified
cost $7,448,344)(h) $ 7,295,599
==========
</TABLE>
(a) Denominated in Italian Lira.
(b) Denominated in Spanish Peseta.
(c) Denominated in British Pounds.
(d) Denominated in U.S. Dollars.
(e) Supranational Issuer.
(f) Denominated in German Marks.
(g) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(h) The cost of investments for federal tax purposes amounts to $7,448,344. The
net unrealized depreciation of investments on a federal tax basis amounts to
$152,745 which is comprised of $40,332 appreciation and $193,077
depreciation at May 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($7,208,864) at May 31, 1997.
(See Notes which are an integral part of the Financial Statements)
FTI GLOBAL BOND FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN
CURRENCY
PAR AMOUNT VALUE
OR PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
------------------------------------------------------
CORPORATE BONDS--3.8%
GERMANY--1.7%
FINANCE--1.7%
40,000,000 (a)Bayerische Landesbank
Girozentrale, Unsub., 7.50%,
2/11/1999 $ 23,934
----------
SWEDEN--2.1%
FINANCE--2.1%
200,000 Statens Bostads, Bond, 10.25%,
5/5/2000 28,758
----------
TOTAL CORPORATE BONDS
(identified cost $58,967) 52,692
----------
GOVERNMENT AGENCIES--81.0%
AUSTRALIA--4.1%
25,000 Australian Government, Bond,
10.00%, 2/15/2006 22,136
20,000 (b)Treasury Corp. of Victoria,
Local Gov't. Guarantee, 8.75%,
7/9/2003 34,558
----------
Total 56,694
----------
CANADA--3.3%
15,000 (c)Canada, Government of, Bond,
6.75%, 8/28/2006 14,911
40,000 Canada, Government of, Deb.,
7.50%, 12/1/2003 31,019
----------
Total 45,930
----------
DENMARK--2.5%
200,000 Denmark, Bond, 8.00%,
3/15/2006 33,936
----------
GERMANY--8.2%
50,000 Deutsche Bundespost, Bond,
7.50%, 12/2/2002 32,462
21,000 Deutschland Republic, Deb.,
6.25%, 1/4/2024 11,551
95,000 Germany(Fed Republic), Bond,
5.875%, 5/15/2000 58,242
20,000 Germany(Fed Republic), Bond,
6.00%, 1/5/2006 11,833
----------
Total 114,088
----------
<CAPTION>
FOREIGN
CURRENCY
PAR AMOUNT VALUE
OR PRINCIPAL IN U.S.
AMOUNT DOLLARS
------------------------------------------------------
<C> <S> <C>
GOVERNMENT AGENCIES (continued)
SUPRANATIONAL--1.2%
10,000 (b)European Investment Bank, Sr.
Unsub., 8.00%, 6/10/2003 $ 16,792
----------
ITALY--9.3%
210,000,000 Buoni Poliennali Del Tes, Deb.,
10.50%, 7/15/1998 128,568
----------
JAPAN--8.7%
3,000,000 Japan-186, Bond, 3.20%,
3/20/2006 26,878
10,000,000 World Bank, Unsub., 4.50%,
6/20/2000 93,334
----------
Total 120,212
----------
NEW ZEALAND--2.6%
48,000 New Zealand, Government of,
Bond, 10.00%, 3/15/2002 36,575
----------
SWEDEN--4.2%
400,000 Sweden (Kingdom of), 10.25%,
5/5/2000 58,020
----------
UNITED KINGDOM--4.7%
37,000 United Kingdom Treasury, Bond,
8.00%, 12/7/2015 64,915
----------
UNITED STATES--32.2%
95,000 Tennessee Valley Authority,
Bond, 6.375%, 9/18/2006 56,863
100,000 United States Treasury Bill,
6/5/1997 99,965
50,000 United States Treasury Bond,
6.25%, 8/15/2023 45,578
35,000 United States Treasury Bond,
8.125%, 8/15/2019 39,353
20,000 United States Treasury Note,
5.625%, 11/30/2000 19,513
35,000 United States Treasury Note,
6.375%, 8/15/2002 34,792
40,000 United States Treasury Note,
6.875%, 3/31/2000 40,550
107,000 United States Treasury Note,
7.00%, 7/15/2006 109,240
----------
Total 445,854
----------
TOTAL GOVERNMENT AGENCIES
(identified cost $1,147,801) 1,121,584
----------
</TABLE>
FTI GLOBAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
PRINCIPAL DOLLARS
AMOUNT
<C> <S> <C>
------------------------------------------------------
(D) REPURCHASE AGREEMENT--10.6%
147,000 J.P. Morgan & Co., Inc., 4.50%,
dated 5/30/1997, due 6/2/1997
(at amortized cost) $ 147,000
----------
TOTAL INVESTMENTS (identified
cost $1,353,768)(e) $1,321,276
=========
</TABLE>
(a) Denominated in Italian Lira.
(b) Denominated in British Pounds.
(c) Denominated in U.S. Dollars.
(d) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(e) The cost of investments for federal tax purposes amounts to $1,353,768. The
net unrealized depreciation of investments on a federal tax basis amounts to
$32,492 which is comprised of $5,035 appreciation and $37,527 depreciation
at May 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($1,385,184) at May 31, 1997.
(See Notes which are an integral part of the Financial Statements)
STATEMENTS OF ASSETS AND LIABILITIES
SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAPITALIZATION INTERNATIONAL INTERNATIONAL GLOBAL
EQUITY FUND EQUITY FUND BOND FUND BOND FUND
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in repurchase agreements $ 1,287,000 $ 3,629,000 $ 2,629,000 $ 147,000
Investments in securities 24,682,848 31,321,426 4,666,599 1,174,276
--------------------- ------------ ------------- -----------
Total investments in securities, at
value 25,969,848 34,950,426 7,295,599 1,321,276
Cash -- 664 627 222
Cash denominated in foreign currencies
(identified cost $0, $163,994, $10,232,
and $6,405, respectively) -- 165,731 10,156 6,360
Income receivable 4,861 123,271 152,247 27,607
Receivable for investments sold 93,579 -- 897,716 131,661
Net receivable for foreign currency
exchange contracts -- -- 62,755 249
--------------------- ------------ ------------- -----------
Total assets 26,068,288 35,240,092 8,419,100 1,487,375
--------------------- ------------ ------------- -----------
LIABILITIES:
Payable for investments purchased 300,002 187,460 -- --
Payable for shares redeemed -- -- 1,178,152 86,457
Payable to Bank 211,372 -- -- --
Net payable for foreign currency exchange
contracts -- 166,522 -- --
Payable for taxes withheld -- 11,934 4,290 696
Accrued expenses 41,560 56,721 27,794 15,038
--------------------- ------------ ------------- -----------
Total liabilities 552,934 422,637 1,210,236 102,191
--------------------- ------------ ------------- -----------
NET ASSETS CONSIST OF:
Paid in capital 24,355,223 31,618,003 7,372,272 1,416,579
Net unrealized appreciation
(depreciation) of investments and
translation of assets and liabilities
in foreign currency 2,537,320 3,272,475 (88,198) (32,730)
Accumulated net realized gain (loss) on
investments and foreign currency
transactions (1,281,374) (182,804) (126,567) (21,711)
Undistributed net investment income (95,815) 109,781 51,357 23,046
--------------------- ------------ ------------- -----------
Total Net Assets $ 25,515,354 $34,817,455 $ 7,208,864 $ 1,385,184
--------------------- ------------ ------------- -----------
SHARES OUTSTANDING 2,087,759 2,873,169 758,889 143,248
--------------------- ------------ ------------- -----------
NET ASSET PER SHARE, OFFERING PRICE AND
REDEMPTION PROCEEDS PER SHARE 12.22 12.12 $9.50 $9.67
--------------------- ------------ ------------- -----------
Investments, at identified cost $ 23,432,528 $31,513,431 $ 7,448,344 $ 1,353,768
Investments, at tax cost $ 23,432,528 $31,513,431 $ 7,448,344 $ 1,353,768
--------------------- ------------ ------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAPITALIZATION INTERNATIONAL INTERNATIONAL GLOBAL
EQUITY FUND EQUITY FUND BOND FUND BOND FUND
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld
of $0, $32,955, $0, and $0,
respectively) $ 35,493 $ 257,367 $ -- $ --
Interest (net of foreign taxes withheld
of $0, $32,955, $5,407, and $815,
respectively) 32,535 49,671 181,862 42,503
--------------------- ------------ ------------- ----------
Total income 68,028 307,038 181,862 42,503
EXPENSES:
Investment advisory fee 109,229 113,735 19,363 4,595
Administrative personnel and services fee 37,397 37,397 37,397 37,397
Custodian fees 7,269 20,932 7,222 7,250
Transfer and dividend disbursing agent
fees and expenses 5,832 11,380 11,307 8,226
Directors'/Trustees' fees 4,606 3,338 3,037 3,050
Auditing fees 9,020 8,580 8,580 8,728
Legal fees 3,233 2,744 3,097 3,144
Portfolio accounting fees 23,129 20,180 22,682 24,343
Share registration costs 6,096 5,866 2,887 3,768
Printing and postage 2,954 3,851 3,556 3,518
Insurance premiums 1,397 1,426 1,410 1,316
Miscellaneous 6,105 4,125 2,832 2,455
--------------------- ------------ ------------- ----------
Total expenses 216,267 233,554 123,370 107,790
Waivers and Reimbursements--
Waiver of Custodian Fee -- -- -- (7,250)
Reimbursement of other operating expenses (52,424) (51,579) (90,177) (97,257)
--------------------- ------------ ------------- ----------
Total Waivers and reimbursements (52,424) (51,579) (90,177) (104,507)
--------------------- ------------ ------------- ----------
Net expenses 163,843 181,975 33,193 3,283
--------------------- ------------ ------------- ----------
Net investment income (loss) (95,815) 125,063 148,669 39,220
--------------------- ------------ ------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) on investments (1,055,922) (63,273) (110,986) (21,711)
Net change in unrealized appreciation
(depreciation) of investments and
translation of assets and liabilities
on foreign currency 1,202,503 2,746,169 (225,878) (52,653)
--------------------- ------------ ------------- ----------
Net realized and unrealized gain (loss)
on investments and foreign currency 146,581 2,682,896 (336,864) (74,364)
--------------------- ------------ ------------- ----------
Change in net assets resulting from
operations $ 50,766 $ 2,807,959 $(188,195) $ (35,144)
===================== ============= ============ ===========
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAPITALIZATION
EQUITY FUND INTERNATIONAL EQUITY FUND
-------------------------------- -------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30, MAY 31, 1997 NOVEMBER 30,
(UNAUDITED) 1996(A) (UNAUDITED) 1996(A)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) $ (95,815) $ (67,424) $ 125,063 $ 2,792
Net realized gain (loss) on
investments and foreign currency
transactions (1,055,922) (255,452) (63,273) 52,073
Net change in unrealized appreciation
(depreciation) of investments and
translation of assets and
liabilities in foreign currency 1,202,503 1,334,817 2,746,169 526,306
-------------- ------------- ------------- -------------
Change in net assets resulting from
operations 50,766 1,041,941 2,807,959 581,171
-------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment
income -- -- (183,739) (8,166)
Distributions from net realized gain
on investments -- -- -- --
-------------- ------------- ------------- -------------
Change in net assets from
distributions to shareholders -- -- (183,739) (8,166)
-------------- ------------- ------------- -------------
SHARE TRANSACTIONS:
Proceeds from sale of shares 10,475,723 20,583,257 21,191,867 11,857,000
Net asset value of shares issued to
shareholders in payment of
distributions declared -- -- 87,891 363
Cost of shares redeemed (4,328,700) (2,307,633) (1,151,974) (364,917)
-------------- ------------- ------------- -------------
Change in net assets from share
transactions 6,147,023 18,275,624 20,127,784 11,492,446
-------------- ------------- ------------- -------------
Change in net assets 6,197,789 19,317,565 22,752,004 12,065,451
NET ASSETS:
Beginning of period 19,317,565 -- 12,065,451 --
-------------- ------------- ------------- -------------
End of period $ 25,515,354 $19,317,565 $ 34,817,455 $12,065,451
=============== ============== ============== ==============
Undistributed net investment income
included in net assets at end of
period -- -- $ 109,780 $ 168,457
=============== ============== ============== ==============
Net gain (loss) as computed for
federal tax purposes $ (1,055,922) $ (197,668) $ (63,273) $ (119,531)
=============== ============== ============== ==============
</TABLE>
(a) For the period from December 22, 1995 (start of performance) to November 30,
1996.
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL BOND FUND GLOBAL BOND FUND
- -------------------------------- -------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30, MAY 31, 1997 NOVEMBER 30,
(UNAUDITED) 1996(A) (UNAUDITED) 1996(A)
--------------------------------------------------------------------
<S> <C> <C> <C>
$ 148,669 $ 200,313 $ 39,220 $ 37,107
(110,986) (133,892) (21,711) 3,629
(225,878) 137,680 (52,653) 19,923
- -------------- ------------- ------------- -------------
(188,195) 204,101 (35,144) 60,659
- -------------- ------------- ------------- -------------
(110,012) (69,302) (45,540) (7,731)
-- -- (3,639) --
- -------------- ------------- ------------- -------------
(110,012) (69,302) (49,179) (7,731)
- -------------- ------------- ------------- -------------
3,138,375 5,549,752 400,100 1,428,150
20,823 -- 21,531 770
(854,020) (482,658) (10,000) (423,972)
- -------------- ------------- ------------- -------------
2,305,178 5,067,094 411,631 1,004,948
- -------------- ------------- ------------- -------------
2,006,971 5,201,893 327,308 1,057,876
5,201,893 -- 1,057,876 --
- -------------- ------------- ------------- -------------
$7,208,864 $ 5,201,893 $ 1,385,184 $ 1,057,876
=============== ============== ============== ==============
$ 51,357 $ 12,700 $ 23,046 $ 29,366
=============== ============== ============== ==============
$ (110,986) $ (13,444) $ (21,711) $ 3,639
=============== ============== ============== ==============
</TABLE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
DISTRIBUTIONS
NET ASSET NET REALIZED DISTRIBUTIONS FROM NET
VALUE, NET AND UNREALIZED TOTAL FROM FROM NET REALIZED
YEAR ENDED NOVEMBER BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT INVESTMENT GAIN ON
30, OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME INVESTMENTS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SMALL CAPITALIZATION EQUITY FUND
1996(a) $ 10.00 (0.04) 2.12 2.08 -- --
1997(b) $ 12.08 (0.05) 0.19 0.14 -- --
INTERNATIONAL EQUITY FUND
1996(a) $ 10.00 0.01(c) 0.99 1.00 (0.01) --
1997(b) $ 10.99 0.04 1.25 1.29 (0.16) --
INTERNATIONAL BOND FUND
1996(a) $ 10.00 0.47(c) (0.10) 0.37 (0.17) --
1997(b) $ 10.20 0.26 (0.74) (0.48) (0.22) --
GLOBAL BOND FUND
1996(a) $ 10.00 0.37 0.13 0.50 (0.08) --
1997(b) $ 10.42 0.32 (0.58) (0.26) (0.45) (0.04)
</TABLE>
(a) Reflects operations for the period from December 22, 1995 (start of
performance) to November 30, 1996.
(b) Six months ended May 31, 1997 (unaudited).
(c) Per share information is based on average shares outstanding.
(d) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(e) Computed on an annualized basis.
(f) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(g) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
--------------------------------------
NET ASSET NET NET ASSETS, PORTFOLIO
TOTAL VALUE, TOTAL INVESTMENT EXPENSE END OF PERIOD TURNOVER
DISTRIBUTIONS END OF PERIOD RETURN (D) EXPENSES INCOME WAIVER (F) (000 OMITTED) RATE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
-- $ 12.08 20.80% 1.50%(e) (0.68%)(e) 1.51%(e) $19,318 94%
-- $ 12.22 1.16% 1.50%(e) (0.88%)(e) 0.48%(e) $25,515 58%
(0.01) $ 10.99 10.04% 1.68%(e) 0.05%(e) 3.05%(e) $12,065 29%
(0.16) $ 12.12 11.91% 1.60%(e) 1.10%(e) 0.45%(e) $34,817 27%
(0.17) $ 10.20 3.75% 1.20%(e) 5.46%(e) 4.63%(e) $ 5,201 190%
(0.22) $ 9.50 (4.84)% 1.20%(e) 5.37%(e) 3.26%(e) $ 7,209 75%
(0.08) $ 10.42 5.02% 0.95%(e) 5.83%(e) 26.94%(e) $ 1,058 287%
(0.49) $ 9.67 (2.60)% 0.50%(e) 5.97%(e) 15.92%(e) $ 1,385 70%
<CAPTION>
AVERAGE
TOTAL COMMISSION
DISTRIBUTIONS RATE PAID (G)
----------
<S> <C>
-- $0.0334
-- $0.0667
(0.01) $0.0365
(0.16) $0.0386
(0.17) --
(0.22) --
(0.08) --
(0.49) --
</TABLE>
FTI FUNDS
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
FTI Funds (the "Trust") is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company. The Trust
consists of four diversified portfolios (individually referred to as the "Fund",
or collectively as the "Funds") which are presented herein:
<TABLE>
<CAPTION>
PORTFOLIO NAME INVESTMENT OBJECTIVE
- -----------------------------------------------------------------------
<S> <C>
FTI Small Capitalization Equity Fund To provide growth of
("Small Capitalization Equity Fund") principal.
FTI International Equity Fund To provide growth of
("International Equity Fund") principal.
FTI International Bond Fund To provide total return.
("International Bond Fund")
FTI Global Bond Fund To provide total return.
("Global Bond Fund")
</TABLE>
The assets of each portfolio are segregated and a shareholder's interest is
limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--U.S. government securities, listed corporate bonds,
other fixed income and asset-backed securities, unlisted securities and
private placement securities are generally valued at the mean of the latest
bid and asked price as furnished by an independent pricing service. Listed
equity securities are valued at the last sale price reported on a national
securities exchange. Short-term securities are valued at the prices
provided by an independent pricing service. However, short-term securities
with remaining maturities of sixty days or less at the time of purchase may
be valued at amortized cost, which approximates fair market value.
Investments in other open-end regulated investment companies are valued at
net asset value. With respect to foreign securities, trading in foreign
cities may be completed at times which vary from the closing of the New
York Stock Exchange. Therefore, foreign securities are valued at the latest
closing price on the exchange on which they are traded prior to the closing
of the New York Stock Exchange. Foreign securities quoted in foreign
currencies are translated into U.S. Dollars at the foreign exchange rate in
effect at noon, eastern time, on the day the value of the foreign security
is determined.
FTI FUNDS
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--It is the policy of the Funds to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Funds to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Funds will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Funds' adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Funds
could receive less than the repurchase price on the sale of collateral
securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date. Certain dividends from foreign securities may be recorded after the
ex-dividend date based upon when the Fund is reasonably able to obtain
information.
FEDERAL TAXES--It is the Funds' policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of their income. Accordingly, no
provisions for federal tax are necessary.
Withholding taxes on foreign interest and dividends have been provided for
in accordance with the Funds' understanding of the applicable country's tax
rules and rates.
As of November 30, 1996, the Funds, for federal tax purposes, had capital
loss carryforwards, as noted below, which will reduce the Funds' taxable
income arising from future net realized gain on investments, if any, to the
extent permitted by the Code, and thus will reduce the amount of the
distributions to shareholders which would otherwise be necessary to relieve
the Funds of any liability for federal tax.
<TABLE>
<CAPTION>
TOTAL TAX
FUND EXPIRATION DATE LOSS CARRYFORWARD
------------------------------ ---------------- ------------------
<S> <C> <C>
Small Capitalization Equity
Fund 2004 $197,668
International Equity Fund 2004 $119,531
International Bond Fund 2004 $ 13,444
</TABLE>
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may engage in
when-issued or delayed delivery transactions. The Funds record when-issued
securities on the trade date and maintain security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
FTI FUNDS
- --------------------------------------------------------------------------------
FOREIGN EXCHANGE CONTRACTS--The Funds may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. Purchase contracts are used to acquire exposure to
foreign currencies; whereas, contracts to sell are used to hedge the Funds'
securities against currency fluctuations. Risks may arise upon entering
these transactions from the potential inability of counter-parts to meet
the terms of their commitments and from unanticipated movements in security
prices or foreign exchange rates. The foreign currency transactions are
adjusted by the daily exchange rate of the underlying currency and any
gains or losses are recorded for financial statement purpose as unrealized
until the settlement date.
As of May 31, 1997, the Funds had outstanding foreign currency commitments
as set forth below:
INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN EXCHANGE CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
----------------- ------------------------------ ------------ ---------- ---------------
<C> <S> <C> <C> <C>
CONTRACTS PURCHASED:
6/2/97 93,964 Pound Sterling $ 153,161 $ 153,711 $ 550
CONTRACTS SOLD:
6/9/97 284,325,191 Japanese Yen 2,279,343 2,444,984 (165,641)
6/10/97 1,092,922 Swiss Francs 743,484 772,694 (29,210)
8/20/97 6,840,520 French Franks 1,200,091 1,190,451 9,640
8/21/97 2,040,658 Deutsche Marks 1,209,637 1,201,083 8,554
8/21/97 2,373,828 Netherlands Guilder 1,251,359 1,241,774 9,585
---------------
Net Unrealized Depreciation on Foreign
Exchange Contracts ($166,522)
==============
</TABLE>
FTI FUNDS
- --------------------------------------------------------------------------------
INTERNATIONAL BOND FUND
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN EXCHANGE CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
----------------- ------------------------------ ------------ ---------- ---------------
<C> <S> <C> <C> <C>
CONTRACTS PURCHASED:
6/17/1997 233,000 Australian Dollar $ 181,740 $ 177,487 $ (4,253)
6/17/1997 14,000 Australian Dollar 10,926 10,664 (262)
6/20/1997 1,004,000 Canadian Dollar 736,919 727,678 (9,241)
8/21/1997 1,765,000 Deutsche Mark 1,046,037 1,038,837 (7,200)
8/14/1997 4,682,000 Spanish Peseta 32,691 32,419 (272)
8/20/1997 1,848,000 French Franc 323,077 321,606 (1,471)
8/8/1997 34,000 Pound Sterling 54,740 55,534 794
6/9/1997 110,399,000 Japanese Yen 884,253 949,349 65,096
6/13/1997 103,000 Swedish Krona 13,449 13,295 (154)
CONTRACTS SOLD:
6/17/1997 172,000 Australian Dollar $ 136,568 $ 131,020 $ 5,548
6/17/1997 7,000 Australian Dollar 5,481 5,332 149
7/14/1997 50,000 Danish Krone 7,679 7,701 (22)
8/20/1997 1,848,000 French Franc 324,210 321,606 2,604
6/3/1997 1,824,451 French Franc 317,511 315,944 1,567
6/20/1997 1,105,272,000 Italian Lira 659,557 651,819 7,738
6/23/1997 695,000 New Zealand Dollar 480,940 478,869 2,071
6/13/1997 50,000 Swedish Krona 6,517 6,454 63
---------------
Net Unrealized Appreciation on Foreign
Exchange Contracts $ 62,755
==============
</TABLE>
FTI FUNDS
- --------------------------------------------------------------------------------
GLOBAL BOND FUND
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN EXCHANGE CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
----------------- ------------------------------ ------------ ---------- ---------------
<C> <S> <C> <C> <C>
CONTRACTS PURCHASED:
6/17/1997 61,000 Australian Dollar $ 47,580 $ 46,466 $ (1,114)
6/17/1997 41,000 Australian Dollar 31,919 31,232 (687)
6/20/1997 144,000 Canadian Dollar 105,693 104,368 (1,325)
8/21/1997 272,000 Deutsche Mark 161,202 160,093 (1,109)
7/14/1997 71,000 Danish Krone 10,905 10,936 31
8/14/1997 5,275,000 Spanish Peseta 36,831 36,525 (306)
8/20/1997 253,000 French Franc 44,231 44,029 (202)
6/13/1997 20,000 Swedish Krona 2,612 2,582 (30)
CONTRACTS SOLD:
6/17/1997 66,000 Australian Dollar $ 52,404 $ 50,275 $ 2,129
6/17/1997 3,000 Australian Dollar 2,348 2,285 63
7/14/1997 133,315 Danish Krone 20,481 20,534 (53)
6/3/1997 254,231 French Franc 44,244 44,016 218
8/20/1997 253,000 French Franc 44,386 44,029 357
8/8/1997 16,000 Pound Sterling 25,760 26,134 (374)
6/20/1997 246,228,000 Italian Lira 146,934 145,210 1,724
6/23/1997 52,000 New Zealand Dollar 35,984 35,829 155
6/13/1997 74,000 Swedish Krona 9,645 9,552 93
6/13/1997 453,000 Swedish Krona 59,150 58,471 679
---------------
Net Unrealized Appreciation on Foreign
Exchange Contracts 249
==============
</TABLE>
FOREIGN CURRENCY TRANSLATION--The accounting records of the Funds are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Funds do not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales
of FCs, currency gains or losses realized between the trade and
FTI FUNDS
- --------------------------------------------------------------------------------
settlement dates on securities transactions, the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on
the Funds' books, and the U.S. dollar equivalent of the amounts actually
received or paid. Net unrealized foreign exchange gains and losses arise
from changes in the value of assets and liabilities other than investments
in securities at fiscal year end, resulting from changes in the exchange
rate.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SMALL CAPITALIZATION
EQUITY FUND INTERNATIONAL EQUITY FUND
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED PERIOD ENDED ENDED PERIOD ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1997 1996 (A) 1997 1996 (A)
- ----------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 874,624 1,795,446 1,870,731 1,131,990
- -----------------------------------
Shares issued to shareholders in
payment of distributions declared -- -- 8,123 34
- -----------------------------------
Shares redeemed (395,558) (196,753) (103,424) (34,285)
- ----------------------------------- ---------- ------------ ----------- ------------
Net change resulting from share
transactions 479,066 1,598,693 1,775,430 1,097,739
- ----------------------------------- --------- ------------ ----------- ------------
</TABLE>
FTI FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL BOND FUND GLOBAL BOND FUND
---------------------------- ----------------------------
SIX MONTHS SIX MONTHS
ENDED PERIOD ENDED ENDED PERIOD ENDED
MAY 31, NOVEMBER 30, MAY 31, NOVEMBER 30,
1997 1996 (A) 1997 1996 (A)
- ----------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 337,354 559,265 40,545 143,789
- -----------------------------------
Shares issued to shareholders in
payment of distributions declared 2,099 -- 2,179 79
- -----------------------------------
Shares redeemed (90,773) (49,056) (966) (42,378)
- ----------------------------------- --------- ---------- ------- ----------
Net change resulting from share
transactions 248,680 510,209 41,758 101,490
- ----------------------------------- --------- ---------- ------- ----------
</TABLE>
(a) For the period from December 22, 1995, (start of performance) to November
30, 1996.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Fiduciary International, Inc., the Funds' investment
adviser (the "Adviser"), receives for its services an annual investment advisory
fee equal to the percentage of the Funds' average daily net assets as follows:
<TABLE>
<CAPTION>
INVESTMENT ADVISORY
FUND FEE PERCENTAGE
--------------------------------------------------------------- --------------------
<S> <C>
Small Capitalization Equity Fund 1.00%
---------------------------------------------------------------
International Equity Fund 1.00%
---------------------------------------------------------------
International Bond Fund 0.70%
---------------------------------------------------------------
Global Bond Fund 0.70%
---------------------------------------------------------------
</TABLE>
The Adviser may voluntarily choose to waive any portion of its fee or reimburse
certain operating expenses of the Funds. The Adviser can modify or terminate
this voluntary waiver or reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Funds
with certain administrative personnel and services. The fee paid to FAS is based
on the level of average aggregate net assets of the Trust for the period.
DISTRIBUTION SERVICES FEE--The Funds have adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Funds will compensate Edgewood Services, Inc., the principal distributor, from
the net assets of the Funds to finance activities intended to result in the sale
of each Fund's shares. The Plan provides that each Fund may incur distribution
expenses up to 0.75% of average daily net assets annually, to compensate
Edgewood Services, Inc.
For the period ended May 31, 1997, the Funds did not incur a distribution
services fee.
FTI FUNDS
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Fiduciary International, Inc. ("FII"), the Funds will pay FII up to 0.25%
of average daily net assets of the Funds for the period. The fee paid to FII is
used to finance certain services for shareholders and to maintain shareholder
accounts. For the period ended May 31, 1997, the Funds did not incur a
shareholder services fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company ("FSSC") serves as transfer and dividend disbursing agent for the Funds.
The fee paid to FSSC is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Funds' accounting records for
which it receives a fee. The fee is based on the level of each Fund's average
daily net assets for the period, plus out-of-pocket expenses.
CUSTODIAN FEES--Fiduciary Trust Company International is the Funds' custodian.
The fee is based on the level of each Fund's average daily net assets for the
period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses were borne initially by FAS.
The Funds have agreed to reimburse FAS for the organizational expenses during
the five year period following each Fund's effective date. For the period ended
May 31, 1997, pursuant to this agreement, the Funds paid FAS as follows:
<TABLE>
<CAPTION>
INITIAL ORGANIZATIONAL
ORGANIZATIONAL EXPENSES
FUND EXPENSES REIMBURSED
---------------------------------------------------- --------------- ---------------
<S> <C> <C>
Small Capitalization Equity Fund $34,076 $ 4,354
----------------------------------------------------
International Equity Fund $34,072 $ 4,354
----------------------------------------------------
International Bond Fund $34,077 $ 4,354
----------------------------------------------------
Global Bond Fund $38,216 $ 4,883
----------------------------------------------------
</TABLE>
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended May 31, 1997, were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
--------------------------------------------------------- ----------- -----------
<S> <C> <C>
Small Capitalization Equity Fund $17,622,205 $12,166,503
---------------------------------------------------------
International Equity Fund $22,497,093 $ 5,334,504
---------------------------------------------------------
International Bond Fund $ 3,473,022 $ 3,320,603
---------------------------------------------------------
Global Bond Fund $ 1,055,055 $ 808,331
---------------------------------------------------------
</TABLE>
FTI FUNDS
- --------------------------------------------------------------------------------
(6) CONCENTRATION OF CREDIT RISK
CONCENTRATION OF CREDIT RISK--The International Equity Fund, International Bond
Fund, and Global Bond Fund invest in securities of non-U.S. issuers. Although
these Funds maintain diversified investment portfolios, the political or
economic developments within a particular country or region may have an adverse
effect on the ability of domiciled issuers to meet their obligations.
Additionally, political or economic developments may have an effect on the
liquidity and volatility of portfolio securities and currency holdings.
At May 31, 1997, the diversification of Industries for the International Equity
Fund was as follows:
<TABLE>
<CAPTION>
% OF
INDUSTRY NET ASSETS
- ---------------------------- ----------
<S> <C>
Aerospace and Defense 3.3
Automobile 0.7
Banking 9.2
Chemicals 4.0
Diversified 4.1
Electrical Equipment 0.4
Electronics 11.5
Entertainment 0.9
Financial Services 7.0
Food & Beverage 3.4
Healthcare 2.8
Hotels 0.7
Industrial Services 3.2
<CAPTION>
% OF
INDUSTRY NET ASSETS
- ---------------------------- ----------
<S> <C>
Insurance 1.6
Manufacturing 1.4
Machinery & Equipment 2.9
Office Equipment 2.3
Oil 3.3
Pharmaceuticals 3.0
Printing & Publishing 1.8
Real Estate 2.0
Restaurants 1.4
Retail Trade 4.5
Telecommunications 8.0
Transportation 2.8
Utilities 2.7
</TABLE>
37
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
Peter A. Aron Edward C. Gonzales
Nancy L. Close Chairman, President and Treasurer
Edward C. Gonzales C. Christine Thomson
James C. Goodfellow Vice President and Assistant Treasurer
Burton J. Greenwald Jay S. Neuman
Secretary
Max F. Miller
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by a Fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
38
