----------------------------------
FTI
----------------------------------
FUNDS
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ANNUAL REPORT
TO SHAREHOLDERS
NOVEMBER 30, 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
G01980-01 (1/98) [LOGO]
<PAGE>
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the second Annual Report to Shareholders for the FTI
Funds, which covers each Fund's operation over the fiscal year from December 1,
1996, through November 30, 1997.
This report begins with a commentary by each Fund's portfolio manager, which
covers economic and market conditions and their impact on Fund performance and
strategy. Following the commentary is a set of graphs showing each Fund's total
return since inception, followed by a complete list of each Fund's holdings and
financial statements.
The following is a Fund-by-Fund performance summary of the 12-month reporting
period.
FTI SMALL CAPITALIZATION EQUITY FUND
Managed to pursue a high level of growth through a diversified portfolio of
small-company stocks, the Fund's performance improved substantially during the
second half of its fiscal year.* As a result, it achieved a total return of
18.96%** as the net asset value increased significantly from $12.08 to $14.37.
The Fund's net assets doubled to reach $40.5 million at the end of the reporting
period.
FTI INTERNATIONAL EQUITY FUND
Despite an international marketplace that weakened due to well-publicized
difficulties in the Asian and Latin American regions, the Fund's portfolio of
international stocks registered very strong performance compared to the
benchmark index over the year.+ The Fund's total return of 13.01%** was achieved
through dividends of $0.20 per share and a net asset value increase of 11%. Net
assets more than tripled to reach $40.9 million at the end of the reporting
period.
FTI INTERNATIONAL BOND FUND
The Fund's performance over the reporting period reflected an international bond
environment that was negatively impacted by a strong U.S. dollar, which held
down returns.+ As a result, the Fund's total return of -5.43%** was consistent
with the negative total return of the overall international bond market. The
Fund's 9% decline in net asset value was tempered by dividends totaling $0.13
per share. At the end of the reporting period, the Fund's net assets totaled
$7.3 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.
<PAGE>
FTI GLOBAL BOND FUND
At the end of the reporting period, this Fund was invested in government and
corporate bonds across 13 countries, including the U.S., to pursue total return
over the long term.+ As foreign bond returns were negatively impacted by a
strong U.S. dollar, the Fund achieved a slightly negative total return of
- -0.42%**. The Fund's net asset value decline of 7% was tempered by dividends
totaling $0.39 per share and capital gains totaling $0.04 per share. Fund net
assets totaled $1.4 million on the last day of the reporting period.
Thank you for pursuing your financial goals through the FTI Funds. As we begin a
new year, we renew our commitment to keeping you up-to-date on the details of
your investment through the highest level of service possible.
Sincerely,
LOGO
President
January 15, 1998
+ Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
** 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.
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
FTI SMALL CAPITALIZATION EQUITY FUND
PERFORMANCE
The FTI Small Capitalization Equity Fund ended the fiscal year with a net asset
value ("NAV") per share of $14.37 and net assets of $40.5 million. The
investment return for the Fund versus the Russell 2000 Index* and the Russell
2000 Growth Index*, respectively, are shown below. The Fund out-performed its
benchmark, the Russell 2000 Growth Index, by 3.9% for the fiscal year ended
November 30, 1997. The reasons for the out-performance were a slight
overweighting in finance, and underweighting in the semi-conductor area of
technology.
<TABLE>
<CAPTION>
ANNUALIZED
FISCAL YEAR SINCE
ENDED 11/97 INCEPTION
------------ ----------
<S> <C> <C>
FTI SMALL CAPITALIZATION EQUITY FUND 19.0%** 20.5%**
RUSSELL 2000 INDEX 23.4% 19.7%
RUSSELL 2000 GROWTH INDEX 15.1% 13.5%
</TABLE>
Inception date is December 22, 1995
The management style of the FTI Small Capitalization Equity Fund is a high
growth style. The Russell 2000 Growth Index is the most appropriate benchmark
for the Fund as this index has a growth bias while the Russell 2000 Index has a
slight value bias. We have used both the Russell 2000 and the Russell 2000
Growth Indices in 1997. Going forward, we will use only the Russell 2000 Growth
Index as it is the more appropriate index in which to compare the performance of
the FTI Small Capitalization Equity Fund.
* The Russell 2000 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 values.
** Past performance is not indicative of future results. Investment return and
principal value will fluctuate, so when shares are redeemed they 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.
<PAGE>
- --------------------------------------------------------------------------------
NOVEMBER 1997 FISCAL YEAR-END MARKET REVIEW
The first quarter of fiscal year 1997 was a very difficult one. The high growth
small capitalization stock class was the worst performing major asset class. All
sectors shared in the weakness, with the highest growth, most volatile areas
having the greatest declines, i.e. technology, biotech, and services. In
dramatic contrast, the second quarter was very strong, with the areas which had
been weakest in the first quarter showing the greatest increases. The third
quarter continued the strength as the high growth companies were selling at
relatively inexpensive prices, with their price-earnings ratios at a large
discount to their growth rates. The fourth quarter saw a more general weakness
in the domestic stock market fueled by the problems in the Far East. We believe
that the small high growth companies, being primarily domestic, should not be as
affected by the varied problems engendered by the Far Eastern economic weakness,
and in some instances may actually benefit from them.
The outlook for the high growth sector of the small cap market in 1998 appears
to be excellent. As can be seen from the charts below, the estimated growth rate
for the stocks in the Russell 2000 Growth Index for 1998 (using IBES estimates)
is 28.6% while the Index is selling at 18.2X earnings. This compares very
favorably with alternate investments domestically such as the Standard & Poors
500 Index ("S&P 500")* which is estimated to have a 14.1% growth rate while
selling at 18.1X earnings.
AS OF NOVEMBER 30, 1997:
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) P/E EPS GROWTH
<S> <C> <C>
1997 22.9 31.3
1998 18.2 28.6
</TABLE>
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) P/E EPS GROWTH
<S> <C> <C>
1997 20.5 11.4
1998 18.1 14.1
</TABLE>
SOURCE: IBES Estimates
Small capitalization stocks are more volatile than large capitalization stocks.
Past performance is not a guarantee of future results.
* 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.
<PAGE>
- --------------------------------------------------------------------------------
The chart below shows the relative low cost of the small cap high growth market.
This chart compares the Salomon Smith Barney Emerging Growth Index* and the S&P
500 price/earnings ratios on the following years estimated earnings per share.
Whenever the Salomon Smith Barney Emerging Growth Index and the S&P 500
price/earnings ratios on one year forward earnings sell close to parity, the
small capitalization stocks have had a period of outperformance. We use the
Salomon Smith Barney Emerging Growth Index as a proxy for the small
capitalization high growth market, and the S&P 500 as a proxy for the domestic
large capitalization market.
ATTRACTIVE CURRENT VALUATIONS
Salomon Smith Barney Emerging Growth Index versus the S&P 500. Relative
price/earnings ratios. Using estimated earnings per share one year forward.
<TABLE>
<S> <C>
61 2.01
62 1.33
63 1.11
64 1.16
65 1.2
66 1.27
67 1.83
68 1.86
69 1.71
70 1.43
71 1.62
72 1.99
73 1.67
74 1.39
75 1.25
76 1.14
77 .94
78 1.18
79 1.28
80 1.37
81 1.89
82 1.53
83 2.11
84 1.6
85 1.42
86 1.26
87 1.1
88 1.09
89 1.12
90 .99
91 1.2
92 1.23
93 1.14
94 1.35
95 1.32
96 1.48
97 1.23
</TABLE>
SOURCE: Smith Barney Emerging Growth Index
* Salomon Smith Barney Emerging Growth Index is composed of companies that have
between $100 million and $2 billion in market capitalization and all have
earnings per share growth rates exceeding 20%; the Index is rebalanced at
least once a year.
<PAGE>
- --------------------------------------------------------------------------------
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 are selling at a reasonable discount to
their growth rates. We continue to find plenty of companies that offer excellent
long term growth potential. We believe that the current demographics will
favorably impact 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 under-researched 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. We believe that the
Fund is advantageously positioned to benefit from the positive forces in the
U.S. economy in 1998.
FTI SMALL CAPITALIZATION EQUITY FUND
SECTOR ALLOCATION AS OF NOVEMBER 30, 1997
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
COMPANY NAME COMPANY DESCRIPTION % OF PORTFOLIO
<S> <C> <C>
Sequent Computer Sys. Inc. Technology 1.73%
Executive Risk Inc. Insurance 1.70
Wilshire Financial Svcs. Group Finance 1.68
Nationwide Financial Svcs. Inc. Finance 1.53
Long Island Bancorp Inc. Bank 1.53
Incyte Pharmaceuticals Inc. Drugs 1.50
Americredit Corp Finance 1.38
Caribiner Intl Inc. Corporate PR 1.37
Industri-Matematik Intl Corp Technology 1.36
Schnitzer Steel Inds Inc. Steel Trading 1.35
</TABLE>
SECTOR ANALYSIS
<TABLE>
<S> <C>
INTER. & CAP. GOODS 6.5
TRANS. .6
FINANCIAL 23.3
UTILITIES 3.7
ENERGY 4.6
DRUG & HEALTH CARE 12.5
CONSUMER 21.4
SCIENCE & TECHNOLOGY 27.4
</TABLE>
<PAGE>
FTI SMALL CAPITALIZATION EQUITY FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN FTI SMALL CAPITALIZATION EQUITY FUND
The graph below illustrates the hypothetical investment of $10,000 in FTI Small
Capitalization Equity Fund (the "Fund") from December 22, 1995 (start of
performance) to November 30, 1997, compared to the Russell 2000 Index, and the
Russell 2000 Growth Index.+
See Appendix A1.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The Russell 2000 Index, and the Russell 2000 Growth Index have
been adjusted to reflect reinvestment of dividends on securities in the index.
+ The Russell 2000 Index and the Russell 2000 Growth Index are not adjusted to
reflect sales charges, expenses, or other fees that the Securities and
Exchange Commission requires to be reflected in the Fund's performance. These
indices are unmanaged. The Investment Adviser has elected to change the
benchmark of the Fund from the Russell 2000 Index to the Russell 2000 Growth
Index. The Russell 2000 Growth Index is more representative of the securities
typically held by the Fund.
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
FTI INTERNATIONAL EQUITY FUND
PERFORMANCE
The FTI International Equity Fund ended the fiscal year with a NAV per share of
$12.20 and net assets of $40.9 million. The investment returns for the Fund
versus the Morgan Stanley Capital International Europe, Australia, and Far East
Index ("MSCI EAFE" Index)* are shown below. The Fund's 13.4% outperformance
versus the benchmark over the past fiscal year was attributable to several
factors: 1) asset allocation: underweighted holdings in Japan and the Asia
Pacific region, overweighted positions in Latin America, 2) stock selection in
Japan, France, Ireland, and the U.K., and 3) currency gains from hedging
portions of the portfolio's core-European and Japanese yen exposure. (Note: all
returns herein refer to MSCI Indices and are in U.S. dollars, unless otherwise
noted).
<TABLE>
<CAPTION>
ANNUALIZED
FISCAL YEAR SINCE
ENDED 11/97 INCEPTION
----------- ----------
<S> <C> <C>
FTI INTERNATIONAL EQUITY FUND 13.0%** 11.9%**
MSCI EAFE INDEX (INCL. NET DIVIDENDS) (0.4%) 3.9%
</TABLE>
Inception date is December 22, 1995
* MSCI EAFE Index is a market capitalization-weighted foreign securities index,
which is widely used to measure the performance of European, Australian, New
Zealand, and Far Eastern stock markets. Indexes are unmanaged and investments
cannot be made in an index.
** Past performance is not indicative of future results. Investment return and
principal value will fluctuate, so when shares are redeemed they 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.
<PAGE>
- --------------------------------------------------------------------------------
NOVEMBER 1997 FISCAL YEAR-END MARKET REVIEW
A decline of 0.4% for the MSCI EAFE Index was hardly the type of performance we
were looking for from international equities over the reporting period. However,
as has been the norm rather than the exception in international markets during
the 1990's, there was a marked divergence of performance among the various
regions. The U.K., Europe, and Latin America turned in solid 20%-plus returns
for the twelve month period, while Japan and Asia Pacific generated returns of a
similar magnitude, unfortunately in negative territory. Eclipsing all other
investment stories during 1997 was the deterioration and eventual meltdown of
Asian Pacific currencies, equities, and economies. The fallout soon spread to an
already fragile Japanese market and economy, as well as to previously healthy
Latin American markets. Europe and the U.K., though impacted by the turmoil,
were able to recover from an initial bout of investor jitters. As noted above,
the Fund's emphasis on U.K., European, and Latin American securities contributed
to the Fund's 13.4% outperformance for the fiscal year ended November 30, 1997.
Compared to the gyrations in Asia Pacific, U.K. AND EUROPEAN EQUITY MARKETS were
quite calm over the reporting period. U.K. and French elections were the only
notable political events, both of which were eventually accepted by the
financial markets. European Monetary Union ("EMU") went from being a question of
whether it would occur, to which countries would be included in the first round
in 1999. With a stronger political consensus in place for EMU, interest rate
convergence continued during the year, with rates in peripheral countries such
as Spain, Italy, and parts of Scandinavia declining substantially. Europe's low
interest rate environment, coupled with strong growth across the Atlantic, led
to further strengthening of the dollar, igniting export-led growth on the
Continent, and providing strong support for European equity markets.
Spanish (+34.7%) and Italian (+26.5%) shares were flag-bearers for the interest
rate convergence theme, while Switzerland (+33.9%), Finland (+29.1%), and the
Netherlands (+23.6%) led the way with their newly found competitiveness in the
export markets. The much anticipated start of the consolidation phase among
European banks and insurance companies led to strong outperformance from these
sectors. Viewing this as a multi-year investment theme, the portfolio is heavily
exposed to European financials through positions in AMVESCAP, FORENINGS
SPARBANKEN, CREDITO ITALIANO, AXA-UAP, and SCOR, among others.
Investing in JAPANESE EQUITIES was difficult enough this year, without having to
address the impact of the Asia Pacific crisis. The Nikkei 225 started the
reporting period in typical 90's fashion, with an 11% sell-off in the face of an
anticipated slowdown in economic growth. The market staged a temporary comeback
during April and May, rallying 16%, as investors anticipated a relatively benign
reaction to April income tax hikes. As investors comprehended the impact of the
tax hikes on consumption and corporate capital investment plans, Japanese
equities sold off sharply. With hindsight, the early readings were clearly
misguided, with the Japanese economy declining at an annualized 11% rate in the
second quarter.
The one positive for Japan had been the competitiveness of the yen. However, as
the Asia crisis intensified, Japan soon found itself with an overhauled currency
relative to its neighbors, which had devalued by as much as 50% in a three month
period. The already weak domestic economy, a crippled banking system, and the
devaluations of its neighbors, led to renewed weakness in Japanese equities,
ending the twelve month period with a decline of 24.6% (15.5% in local
currency). The Fund's investments in technology and exporters
<PAGE>
- --------------------------------------------------------------------------------
(SONY, ROHM) produced positive returns for the period, contributing to
significant outperformance versus the overall Japanese market. Looking forward,
these companies' regional manufacturing plants should help to shield them from
their neighbors' increased competitiveness.
Our outlook for Asia Pacific had been negative since mid-year, however, we
clearly did not anticipate the meltdown that occurred in ASIAN PACIFIC EQUITIES
and currencies. What started as a local problem in Thailand, quickly spread to
Malaysia, Indonesia, and the Philippines, eventually working north toward Hong
Kong and Korea. While the specifics vary by country, the general problems in the
region were and continue to be high current account and fiscal deficits,
excessive foreign currency borrowing to fund inefficient capital spending (e.g.,
empty office towers), and government interference in banking systems and capital
markets.
Even after International Monetary Fund ("IMF") packages were reached with
specific countries, investors have been hesitant to return to the region until
the long term causes such as government intervention in the free market system
have been addressed. The magnitude of the equity and currency market declines
has certainly exceeded investors' pessimistic expectations; over the past twelve
months the MSCI Far East Emerging Markets Free Index declined 53.0% (37.6% in
local currencies). We currently maintain minimal exposure to the region,
focusing on defensive companies like TELSTRA (Australian telecom), and long term
investments such as HSBC HOLDINGS (based in Hong Kong but more appropriately
classified as a global banking group).
Unlike their Asian counterparts, LATIN AMERICAN EQUITIES have generated
impressive returns over the past twelve months, increasing 27.1% in U.S.
dollars. By the middle of July 1997, Brazilian equities were actually up more
than 90% for the calendar year. The primary differences between the two regions
were: 1) growth was accelerating in Latin America while decelerating in
southeast Asia, 2) investment spending was geared to more productive assets
rather than the property market, and 3) Latin America governments were pursuing
pro-market policies while trying to shrink the public sector.
While growth prospects were indeed better in Latin America, the region was not
immune to the sell-off in Asian equity markets. Brazil was the primary target as
investors focused on the country's relatively high current account deficit,
questioning whether the Brazilian real would be able to maintain its link to the
U.S. dollar. The jury is still out on this issue. One could argue that the
controlled 7% annual devaluation versus the dollar would eliminate the
currency's 15% to 20% overvaluation within a few years. Further, the government
continues to take appropriate steps to reform the public sector and reduce the
fiscal deficit. Nonetheless, if the pressure on the real becomes excessive, the
government may find itself with no choice. While we do not see this as the
likely outcome, we recognize the increased risk in Latin American equities.
Subsequently, we have reduced the portfolio's exposure to the region,
maintaining core holdings in public utilities (TELEBRAS, CEMIG, TELECOM
ARGENTINA) which are less dependent on domestic growth and tied more to
efficiency gains and upcoming privatizations.
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OUTLOOK AND STRATEGY:
Looking to 1998, the international investment arena promises to be quite
challenging. The two most pressing issues are how Japan will address its
economic and banking system woes, and the willingness of Asian governments to
work with the IMF and the eventual success of the rescue packages. At this point
it is too early to render a verdict regarding Japan's response to its problem.
The recently released rescue plan (similar to the U.S. thrift rescue plan) and
the tax cut package are clearly steps in the right direction. More important,
however, will be the implementation details which will be ironed out over the
next couple of months.
As a result of the southeast Asian crisis, growth prospects in the region are
obviously quite poor for 1998. Even if the governments work with the IMF, the
medicine will be quite painful for their domestic economies. The economies will
have to depend on exports for growth next year, thereby all but eliminating any
global inflationary worries. It is often said that equity investors discount
events at least six months in the future. If they are to return to the region
any time soon it will not be in anticipation of a sharp pick-up in economic
growth. Rather, a change in the fundamental interrelationship of governments and
business, and a more pro-market stance may give investors the confidence to make
long term investments in the region's equities and currencies.
While Japan and Asia Pacific may indeed start to sort out their problems in the
first half of 1998, we are hesitant at this stage to give them the benefit of
the doubt. Instead, we maintain the Fund's focus on U.K. and European equities
which are expected to benefit from relatively strong earnings growth in 1998.
Additionally, Asia's problems are likely to warrant a scarcity premium for U.K.
and European equities. Lastly, while the risk of investing in Latin America has
increased, the return potential merits the Fund's exposure to the region.
Regarding currencies, the near term trends continue to support the U.S. dollar
(approximately 35% of the portfolio's yen and core-European exposure is hedged
back into U.S. dollars). Looking to mid-1998, the U.S. dollar is unlikely to
maintain its strength versus Europe, as their domestic economies continue to
recover. Likewise, trading over 130 yen/dollar, the U.S. dollar is more
vulnerable if the government's rescue package is eventually well received and as
trade deficit problems resurface.
<PAGE>
FTI INTERNATIONAL EQUITY FUND--NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
REGIONAL ALLOCATION
EUROPE 46
CASH 3
OTHER 2
LAT AM 7
ASIA PACIFIC 5
JAPAN 18
U.K./IRELAND 23
SECTOR ALLOCATION
UTILITIES 12
FINANCIALS 25
TRANSPORT. 3
INTER. &
CAP. GOODS 16
SCIENCE &
TECH. 12
DRUG &
HEALTH 8
CONSUMER 20
ENERGY 5
TOP REGIONAL HOLDINGS
<TABLE>
<CAPTION>
REGION COMPANY SECTOR % OF PORTFOLIO
- ---------------- ---------------------------- --------------------- --------------
<S> <C> <C> <C>
U.K./IRELAND Compass Group Services 2.6%
Bank of Ireland Financial 2.5%
EUROPE Banco de Santander Financial 2.2%
AXA Financial Services 2.1%
JAPAN Sony Corp. Electronics 2.1%
Canon Inc. Precision Instruments 1.8%
ASIA PACIFIC Westpac Banking Financial 1.1%
New World Infra Infrastructure 0.9%
LATIN AMERICA Telebras Telecommunications 1.8%
Panamerican Beverages Beverages 1.7%
</TABLE>
<PAGE>
FTI INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN FTI INTERNATIONAL EQUITY FUND
The graph below illustrates the hypothetical investment of $10,000 in FTI
International Equity Fund (the "Fund") from December 22, 1995 (start of
performance) to November 30, 1997, compared to the Morgan Stanley Capital
International Europe, Australia, and Far East Index ("MSCI EAFE") Index.+
See Appendix A.2.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The MSCI EAFE Index has been adjusted to reflect reinvestment
of dividends on securities in the index.
+ The MSCI EAFE Index is not adjusted to reflect sales charges, expenses, or
other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. This index is unmanaged.
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
FTI INTERNATIONAL BOND FUND
FTI GLOBAL BOND FUND
PERFORMANCE
The investment returns for the FTI International Bond Fund and the FTI Global
Bond Fund versus the Salomon Brothers Non-U.S. Dollar World Government Bond
Index* and the Salomon Brothers World Government Bond Index*, respectively, are
shown below. While global bond markets have produced attractive returns in local
currency terms, the continued appreciation of the U.S. dollar has been
responsible for turning these gains into losses. For the fiscal year ended
November 30, 1997, the FTI Global Bond Fund out-performed its benchmark by 0.30%
while the FTI International Bond Fund matched its benchmark returns (in both
cases before expenses). The relative out-performance (before expenses) was due
to two primary factors: 1) the hedging of a portion of the portfolio's currency
exposure into U.S. dollars, which given the weakness in foreign currencies,
produced gains for the Fund, and 2) the overweighted interest rate exposure in
the fourth quarter of the year, which boosted returns as bond yields fell.
<TABLE>
<CAPTION>
ANNUALIZED
FISCAL YEAR SINCE
ENDED 11/97 INCEPTION
------------ ----------
<S> <C> <C>
FTI INTERNATIONAL BOND FUND (4.10%)** (0.98%)**
SALOMON BROTHERS NON-U.S. DOLLAR
WORLD GOVERNMENT BOND INDEX (4.10%) 0.35%
FTI GLOBAL BOND FUND (0.10%)** 2.33%**
SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX (0.40%) 2.17%
NOTE: Inception date December 22, 1995
</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, Austria, Belgium, Canada,
Denmark, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, the
United Kingdom and the United States (collectively, the "WGBI 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.
** Past performance is not indicative of future results. Investment return and
principal value will fluctuate, so when shares are redeemed they 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.
Indexes are unmanaged and investments cannot be made in an index. Information
on the Funds' performance after expenses appears on pages 1, 2, 17, and 18.
<PAGE>
- --------------------------------------------------------------------------------
NOVEMBER 1997 FISCAL YEAR-END REVIEW
There have been four predominant themes in the global fixed income markets over
the past twelve months: the fall of global rates of inflation (and inflation
expectations); the continued appreciation of the dollar; the march towards EMU;
and more recently, the turbulence in Asian currency and capital markets. We were
not well positioned for the first of these trends, but have been well placed to
profit from the other three.
As we noted in the Fund's semi-annual report dated May 31, 1997, the remarkable
absence of inflationary pressures in the U.S., in this, the seventh year of
economic expansion, and indeed recent data show inflation has fallen close to
2.0%, a new low for this cycle. This is especially remarkable given the buoyant
stock market and low levels of unemployment. The strong U.S. dollar and weak
demand in Asia have been in part responsible for this situation, which has
permitted the Federal Reserve Board (the "Fed") to take further action following
a 0.25% increase in short term interest rates early in 1997, even as economic
growth approached 4.0%. This environment, which an increasing number of analysts
attributed to a new paradigm in which inflationary pressures would continue to
be absent, drove long bond yields below 6.5% even as unemployment fell to its
lowest levels for 25 years. In the early part of the fiscal year, we were
underweighted in our duration exposure (a measure of the portfolio's sensitivity
to changing interest rates), as we believed that a condition of above-trend
growth (which did happen) would cause the Fed to raise interest rates (which
didn't happen). As inflation continued to fall, we eliminated the underweight,
before aggressively increasing duration exposure as the Asian crisis broke.
In Europe, 1997 was the year that EMU moved from a dream to a near certainty.
The success in bringing down budget deficits and inflation increased the
credibility of the project in the financial markets as well as widening the
probable membership from a narrow few to encompass eleven countries. Long term
yields in the "EMU-11" continued to converge, bringing yield spreads relative to
Germany down in Italy and Spain by 0.75% to 1.00%. In the U.K., the victorious
Labour Party granted independence to the Bank of England over setting interest
rates, leading to a sharp fall in the U.K. government bond yields. The new
government also signaled its preference for joining the EMU in the future,
further boosting bond prices. For much of the reporting period we have
maintained overweighted positions in both the U.K. and Italy.
In Japan, bond yields fell to the lowest levels in a developed country since
World War II, with ten-year yields falling to 1.8%. The economy weakened once
more as government efforts to reduce the budget deficit depressed final demand.
With short-term rates already at 0.5%, the authorities looked to a weaker yen to
boost exports. With such low levels of yields, and the risk of a policy shift,
we continue to see little value in Japanese bonds, and have maintained a large
under weighted position there. Additionally, as the U.S. dollar has risen to new
cyclical highs against the yen in response to Japanese economic weakness and the
very low level of short term rates we have maintained a low level of exposure
against the yen.
It is likely, though, that 1997 will most be remembered for the collapse of the
"Asian miracle". At the beginning of the year Thailand, Malaysia, the
Philippines, Indonesia (the so-called ASEAN 4), Taiwan, South Korea and Hong
Kong had currencies that were either tied directly to the U.S. dollar or more
loosely linked. By year-end Hong Kong was the only one to be able to maintain
its peg, and the rest saw their previously stable currencies plunge more than
40% against the U.S. dollar, dragging their stock markets down
<PAGE>
- --------------------------------------------------------------------------------
in the process. It is always easy with hindsight to point to the key factors
that lead to key market events, but in this case there does not seem to be a
particular catalyst for the crisis, apart from a rapid loss of confidence. The
bank runs of the 1800's and early 1900's in the U.S. and Europe showed how
devastating such a loss of confidence can be. In Asia rapid economic development
was not matched by parallel growth in that region's financial sector. Therefore
as rising investment required increased financing, corporations turned either to
foreign sources of financing, or else to the banks, who funded themselves
offshore also. Additionally much of this financing was short term in nature.
When confidence collapsed, foreign institutions were simply unwilling to roll
over existing loans as they matured, and as currencies began to fall, domestic
institutions rushed to buy U.S. dollars to service high levels of foreign debt,
exacerbating the problem.
While the problem was limited to the ASEAN 4, a group of countries with a small
share of global trade, Western markets were not impacted. However, as one
currency after another sank, pressure built on the Hong Kong dollar, and Korean
won, two nations with much more sizeable economies and significant participants
in global trade. As Hong Kong stocks plummeted and the Korean won sank, Western
markets shuddered. The ensuing flight to quality pushed U.S. and European bond
yields lower, and led the U.S. dollar sharply higher. Falling gold and other
commodity prices reignited fears that the Asian crisis would push the global
economy into deflation, providing a further boost to bond prices.
INVESTMENT OUTLOOK AND STRATEGY
Over the past twelve months, currency allocations have been kept broadly
unchanged at 15% to 20% overweighted in our dollar block currency allocations
(which include the Canadian dollar), underweighted European currencies by 5% to
10% and in Japanese yen by 10% to 15%. We have made more significant changes in
bond market exposures, increasing duration exposures in both the dollar block
and Europe, increasing total portfolio duration by 1-5 years in the FTI Global
Bond Fund, and by 0-8 years in the FTI International Bond Fund.
The outlook for the next twelve months may be greatly impacted by how soon the
Asian currency volatility is brought to an end. It is encouraging that the IMF
and the Industrialized Nations have moved swiftly to the aid of the beleaguered
nations in South East Asia. However, the adjustment process is likely to be long
and painful for many of these economies. There remains a risk that entrenched
special interests will prevent the necessary reforms from taking place and that
volatility will remain. However, if Korea moves swiftly to reform its financial
institutions (as the newly elected government seems ready to do), and Japanese
growth recovers, then financial market instability may come to an end.
Currently, neither the FTI International Bond Fund nor the FTI Global Bond Fund
has exposure to non-Japan Asia, nor to any emerging markets. As the crisis winds
down we look to gain some exposure to selected emerging markets in Latin America
and Eastern Europe which now offer outstanding long term value, having caught
some of the contagion from Asia. If the crisis worsens, our current portfolios
of high quality, largely government securities should perform well.
<PAGE>
FTI INTERNATIONAL BOND FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN
FTI INTERNATIONAL BOND FUND
The graph below illustrates the hypothetical investment of $10,000 in FTI
International Bond Fund (the "Fund") from December 22, 1995 (start of
performance) to November 30, 1997, compared to the Salomon Brothers Non-U.S.
Dollar World Government Bond Index ("SBNUSDWGBI").+
See Appendix A.3.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The SBNUSDWGBI has been adjusted to reflect reinvestment of
dividends on securities in the index.
+ The SBNUSDWGBI is not adjusted to reflect sales charges, expenses, or other
fees that the Securities and Exchange Commission requires to be reflected in
the Fund's performance. This index is unmanaged.
<PAGE>
FTI GLOBAL BOND FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN FTI GLOBAL BOND FUND
The graph below illustrates the hypothetical investment of $10,000 in FTI Global
Bond Fund (the "Fund") from December 22, 1995 (start of performance) to November
30, 1997, compared to the Salomon Brothers World Government Bond Index
("SBWGBI").+
See Appendix A.4.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The SBWGBI has been adjusted to reflect reinvestment of
dividends on securities in the index.
+ The SBWGBI is not adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be reflected in the
Fund's performance. This index is unmanaged.
<PAGE>
FTI SMALL CAPITALIZATION EQUITY FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--91.3%
AEROSPACE & DEFENSE--1.0%
10,000 AAR Corp. $ 385,625
------------
AUCTION HOUSE--1.0%
24,000 Sothebys Holdings, Inc., Class A 409,500
------------
BANKING--4.5%
6,615 Charter One Financial, Inc. 391,939
13,000 Long Island Bancorp, Inc. 612,625
15,000 Ocwen Asset Investment Corp. 272,812
18,000 Security Bank Holding Co. 256,500
9,750 Texas Regional Bancshares, Inc.,
Class A 269,344
------------
Total 1,803,220
------------
BASIC INDUSTRY--3.8%
12,200 Minerals Technologies, Inc. 533,750
23,500 Oregon Steel Mills, Inc. 461,188
19,300 Schnitzer Steel Industries,
Inc., Class A 540,400
------------
Total 1,535,338
------------
COMMERCIAL SERVICES--4.8%
13,000 (a)Caribiner International, Inc. 551,688
9,000 (a)Consolidated Graphics, Inc. 430,313
20,600 (a)Core, Inc. 216,300
20,000 (a)On Assignment, Inc. 465,000
1,000 Prepaid Legal Services, Inc. 28,312
3,000 (a)Quintiles Transnational Corp. 234,375
------------
Total 1,925,988
------------
COMPUTER SOFTWARE--9.7%
5,000 (a)CBT Group PLC, ADR 353,125
15,400 (a)Cognicase, Inc. 146,300
25,500 (a)Crystal Systems Solutions 497,250
23,600 (a)Discreet Logic, Inc. 448,400
7,500 Dr. Solomon's Group PLC. ADR 260,625
8,000 (a)HNC Software 252,000
31,000 (a)ISG International Software
Group Ltd. 387,500
15,000 (a)J.D. Edwards & Co. 513,750
7,500 (a)Lernout & Hauspie Speech
Products N.V. 359,531
30,000 (a)OrCAD, Inc. 243,750
3,000 (a)Peoplesoft, Inc. 196,313
6,200 Real Networks, Inc. 95,325
10,000 (a)UOL Publishing, Inc. 160,000
------------
Total 3,913,869
------------
<CAPTION>
SHARES VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
COMPUTERS--1.9%
30,000 (a)Best Software, Inc. $ 311,250
5,000 (a)Electronics for Imaging, Inc. 241,250
6,000 (a)Transaction Systems
Architects, Inc., Class A 232,687
------------
Total 785,187
------------
CONSULTING SERVICES--1.7%
7,000 (a)Cambridge Technology
Partners, Inc. 272,125
10,700 (a)Metzler Group, Inc. 417,300
------------
Total 689,425
------------
CONSUMER NON-DURABLES--1.3%
10,800 Helen of Troy Ltd. 153,900
10,000 St. John Knits, Inc. 381,875
------------
Total 535,775
------------
EDUCATION--1.1%
16,000 (a)DeVRY, Inc. 428,000
------------
ENERGY MINERALS--1.0%
20,000 (a)Louis Dreyfus Natural Gas
Corp. 413,750
------------
ENVIRONMENTAL CONTROL--1.0%
15,000 (a)Tetra Tech, Inc. 383,438
------------
FINANCIAL SERVICES--9.4%
20,000 (a)Americredit Corp. 552,500
11,000 CCA Prison Realty Trust 391,875
12,750 (a)First Alliance Co. 267,750
30,000 Franchise Mortgage Acceptance
Co. LLC 525,000
19,700 Imperial Credit Commercial
Mortgage Investment Corp. 307,812
2,000 (a)Jackson Hewitt, Inc. 134,125
18,000 Nationwide Financial Services,
Inc., Class A 615,375
6,400 Silicon Valley Bancshares 337,200
24,500 (a)Wilshire Financial Services
Group, Inc. 673,750
------------
Total 3,805,387
------------
FOOD & BEVERAGE--1.3%
9,000 (a)Suiza Foods Corp. 523,688
------------
FUNERAL SERVICES--0.9%
18,000 (a)Equity Corporation
International 384,750
------------
</TABLE>
<PAGE>
FTI SMALL CAPITALIZATION EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
HEALTHCARE--8.3%
9,600 (a)Access Health, Inc. $ 285,600
17,000 (a)American Oncology Resources,
Inc. 231,625
19,300 (a)Assisted Living Concepts,
Inc. 330,513
14,000 (a)Curative Technologies, Inc. 399,000
15,000 (a)Genset SA 335,625
35,000 (a)Gentle Dental Service Corp. 441,875
42,400 (a)Matritech, Inc. 233,200
6,000 (a)Pediatrix Medical Group 265,500
62,000 (a)Quidel Corp. 240,250
13,500 (a)RehabCare Group, Inc. 364,500
26,400 (a)Vista Medical Technologies,
Inc. 240,900
------------
Total 3,368,588
------------
INSURANCE--4.8%
15,000 AmVestors Financial Corp. 329,062
6,600 Berkley, W. R. Corp. 274,725
10,500 Executive Risk, Inc. 682,500
2,500 (a)Markel Corp. 385,000
3,600 Transatlantic Holdings, Inc. 257,175
------------
Total 1,928,462
------------
MANUFACTURING--2.3%
9,200 (a)Berg Electronics Corp. 212,175
5,500 Borg-Warner Automotive, Inc. 259,188
14,500 (a)In Focus Systems, Inc. 476,687
------------
Total 948,050
------------
MEDICAL SUPPLIES--1.0%
6,900 (a)Lincare Holdings, Inc. 388,125
------------
OIL SERVICES--3.1%
10,000 (a)Atwood Oceanics, Inc. 493,125
3,000 (a)BJ Services Co. 215,438
25,000 (a)Transmontaigne Oil Co. 375,000
4,000 Transocean Offshore, Inc. 189,750
------------
Total 1,273,313
------------
PHARMACEUTICALS--3.8%
12,000 Celgene Corp. 108,750
15,000 (a)Incyte Pharmaceuticals, Inc. 603,750
21,000 Interferon Sciences, Inc. 195,563
40,000 (a)International Isotopes, Inc. 367,500
8,500 (a)Zonagen, Inc. 263,500
------------
Total 1,539,063
------------
<CAPTION>
SHARES VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
PRODUCER MANUFACTURING--2.1%
11,000 (a)Cable Design Technologies,
Class A $ 445,500
16,000 (a)MotivePower Industries, Inc. 424,000
------------
Total 869,500
------------
REAL ESTATE--1.6%
14,500 Cornerstone Properties, Inc. 280,031
500 (a)Grubb & Ellis Co. 6,219
11,999 Patriot American Hospitality,
Inc. 374,969
------------
Total 661,219
------------
RETAIL--1.1%
8,000 (a)Brylane, Inc. 414,000
3,800 Let's Talk Cellular & Wireless,
Inc. 43,700
------------
Total 457,700
------------
SECURITIES--1.0%
6,000 Jefferies Group, Inc. 425,250
------------
SERVICES--6.7%
27,200 (a)Getty Communications PLC 391,000
20,000 (a)Industri-Matematik
International Corp. 545,000
21,000 (a)Maximus, Inc. 506,625
17,300 Peterson Cos., Inc., Class A 311,400
21,400 (a)Pierce Leahy Corp. 521,625
15,000 (a)Wackenhut Corrections Corp. 420,000
------------
Total 2,695,650
------------
TECHNOLOGY--8.7%
12,200 (a)Brightpoint, Inc. 195,962
14,000 (a)Computer Products, Inc. 277,375
13,000 (a)FEI Co. 214,500
15,000 (a)Genesys Telecommunications
Laboratories, Inc. 455,625
12,000 Henry Jack & Associates, Inc. 303,000
10,000 (a)Radisys Corp. 447,500
3,900 Safeguard Scientifics, Inc. 123,094
29,900 (a)Sequent Computer Systems,
Inc. 695,175
10,000 (a)Uniphase Corp. 401,250
11,000 (a)Visio Corp. 413,875
------------
Total 3,527,356
------------
</TABLE>
<PAGE>
FTI SMALL CAPITALIZATION EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
TELECOMMUNICATIONS--1.8%
14,500 (a)IXC Communications, Inc. $ 502,047
29,000 (a)Metro One Telecommunications 239,250
------------
Total 741,297
------------
TRANSPORTATION--0.6%
10,000 (a)Heartland Express, Inc. 236,250
------------
TOTAL COMMON STOCKS (identified
cost $32,054,230) 36,982,763
------------
(B)REPURCHASE AGREEMENT--7.8%
$ 3,162,000 J.P. Morgan & Co., Inc., 4.65%,
dated, due (at amortized cost) 3,162,000
------------
TOTAL INVESTMENTS (identified
cost $35,216,230)(c) $ 40,144,763
==========
</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 $35,253,822. The
net unrealized appreciation of investments on a federal tax basis amounts to
$4,890,941 which is comprised of $6,046,531 appreciation and $1,155,590
depreciation at November 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($40,505,702) at November 30, 1997.
The following acronyms are used throughout this portfolio:
ADR -- American Depository Receipt
LLC -- Limited Liability Corporation
PLC -- Public Limited Company
SA -- Support Agreement
(See Notes which are an integral part of the Financial Statements)
<PAGE>
FTI SMALL CAPITALIZATION EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Total investments in securities, at value (identified cost $35,216,230 and tax
cost $35,253,822) $40,144,763
- --------------------------------------------------------------------------------
Cash 573
- --------------------------------------------------------------------------------
Income receivable 6,090
- --------------------------------------------------------------------------------
Receivable for investments sold 898,917
- --------------------------------------------------------------------------------
Deferred organizational costs 27,640
- -------------------------------------------------------------------------------- -----------
Total assets 41,077,983
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased $492,249
- ---------------------------------------------------------------------
Accrued expenses 80,032
- --------------------------------------------------------------------- --------
Total liabilities 572,281
- -------------------------------------------------------------------------------- -----------
Net Assets for 2,817,809 shares outstanding $40,505,702
- -------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid in capital $34,589,220
- --------------------------------------------------------------------------------
Net unrealized appreciation of investments 4,928,533
- --------------------------------------------------------------------------------
Accumulated net realized gain on investments 1,245,243
- --------------------------------------------------------------------------------
Net operating loss (257,294)
- -------------------------------------------------------------------------------- -----------
Total Net Assets $40,505,702
- -------------------------------------------------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------
$40,505,702 / 2,817,809 shares outstanding $14.37
- -------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
FTI SMALL CAPITALIZATION EQUITY FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Dividends $ 102,162
- ---------------------------------------------------------------------------------
Interest 73,653
- --------------------------------------------------------------------------------- ----------
Total income 175,815
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee $ 288,740
- ---------------------------------------------------------------------
Administrative personnel and services fee 75,000
- ---------------------------------------------------------------------
Custodian fees 14,949
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 18,479
- ---------------------------------------------------------------------
Directors'/Trustees' fees 6,805
- ---------------------------------------------------------------------
Auditing fees 20,419
- ---------------------------------------------------------------------
Legal fees 3,292
- ---------------------------------------------------------------------
Portfolio accounting fees 40,745
- ---------------------------------------------------------------------
Share registration costs 11,433
- ---------------------------------------------------------------------
Printing and postage 5,067
- ---------------------------------------------------------------------
Insurance premiums 2,442
- ---------------------------------------------------------------------
Miscellaneous 14,368
- --------------------------------------------------------------------- ---------
Total expenses 501,739
- ---------------------------------------------------------------------
Reimbursement of other operating expenses (68,630)
- --------------------------------------------------------------------- ---------
Net expenses 433,109
- --------------------------------------------------------------------------------- ----------
Net operating loss (257,294)
- --------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
- ---------------------------------------------------------------------------------
Net realized gain on investments 1,470,695
- ---------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 3,593,716
- --------------------------------------------------------------------------------- ----------
Net realized and unrealized gain on investments 5,064,411
- --------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $4,807,117
- --------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
FTI SMALL CAPITALIZATION EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------
Net operating loss $ (257,294) $ (67,424)
- --------------------------------------------------------------
Net realized gain (loss) on investments ($1,480,440 and
$(197,668), respectively, as computed for federal tax
purposes) 1,470,695 (225,452)
- --------------------------------------------------------------
Net change in unrealized appreciation of investments 3,593,716 1,334,817
- -------------------------------------------------------------- ----------- -----------
Change in net assets resulting from operations 4,807,117 1,041,941
- -------------------------------------------------------------- ----------- -----------
SHARE TRANSACTIONS--
- --------------------------------------------------------------
Proceeds from sale of shares 22,194,894 20,583,257
- --------------------------------------------------------------
Cost of shares redeemed (5,813,874) (2,307,633)
- -------------------------------------------------------------- ----------- -----------
Change in net assets resulting from share transactions 16,381,020 18,275,624
- -------------------------------------------------------------- ----------- -----------
Change in net assets 21,188,137 19,317,565
- --------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------
Beginning of period 19,317,565 --
- -------------------------------------------------------------- ----------- -----------
End of period $40,505,702 $19,317,565
- -------------------------------------------------------------- ----------- -----------
</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)
<PAGE>
FTI SMALL CAPITALIZATION EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.08 $10.00
- --------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------
Net operating loss (0.09) (0.04)
- --------------------------------------------------------------
Net realized and unrealized gain on investments 2.38 2.12
- -------------------------------------------------------------- --------- ---------
Total from investment operations 2.29 2.08
- -------------------------------------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $14.37 $12.08
- -------------------------------------------------------------- --------- ---------
TOTAL RETURN (B) 18.96% 20.80%
- --------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------
Expenses 1.50% 1.50%*
- --------------------------------------------------------------
Net operating loss (0.89%) (0.68%)*
- --------------------------------------------------------------
Expense waiver/reimbursement (c) 0.24% 1.51%*
- --------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------
Net assets, end of period (000 omitted) $40,505 $19,318
- --------------------------------------------------------------
Average commission rate paid (d) $0.0620 $0.0334
- --------------------------------------------------------------
Portfolio turnover 111% 94%
- --------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from December 22, 1995 (start of
performance) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) 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)
<PAGE>
FTI INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
COMMON STOCKS--95.0%
ARGENTINA--2.4%
12,900 (a) Disco SA, ADR $ 462,787
16,600 Telecom Argentina SA, ADR 509,412
------------
TOTAL ARGENTINA 972,199
------------
AUSTRALIA--1.8%
173,000 Telstra Corp. Ltd. 324,866
68,400 Westpac Banking Corp. Ltd. 429,237
------------
TOTAL AUSTRALIA 754,103
------------
BRAZIL--3.4%
13,300 Companhia Energetica de Minas
Gerais, ADR 647,417
7,000 Telecomunicacoes Brasileiras SA,
ADR 730,625
------------
TOTAL BRAZIL 1,378,042
------------
DENMARK--1.7%
20,500 (a) ISS International Service,
Class B 687,161
------------
FINLAND--1.5%
6,600 KCI Konecranes 235,212
16,500 Metra OY, Class B 402,337
------------
TOTAL FINLAND 637,549
------------
FRANCE--7.3%
12,000 AXA 870,835
15,800 Lagardere S.C.A. 455,000
6,000 (a) SGS-Thomas Microelectronics
N.V. 423,119
14,100 Scor SA 606,439
6,127 Total SA-B 643,494
------------
TOTAL FRANCE 2,998,887
------------
GERMANY--7.6%
4,700 Adidas AG 662,291
1,320 Buderus AG 637,732
36,900 (a) Deutsche Lufthansa AG 700,964
9,800 Siemens AG 575,441
8,700 Veba AG 517,017
------------
TOTAL GERMANY 3,093,445
------------
HONG KONG--2.2%
35,000 (a) Cheung Kong 246,756
11,378 HSBC Holdings PLC 274,504
194,000 (a) New World Infrastructure 382,715
------------
TOTAL HONG KONG 903,975
------------
<CAPTION>
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
IRELAND--3.5%
76,373 Bank of Ireland $ 1,034,478
7,900 (a) Elan Corp. PLC, ADR 416,725
------------
TOTAL IRELAND 1,451,203
------------
ITALY--6.5%
155,000 Credito Italiano 424,385
98,000 Eni Spa 572,096
264,000 Parmalat Finanziaria SPA 381,278
160,600 Telecom Italia Mobile SPA 650,280
101,000 Telecom Italia SPA 629,657
------------
TOTAL ITALY 2,657,696
------------
JAPAN--12.7%
34,000 Banyu Pharm 431,577
31,000 Canon, Inc. 748,129
11,400 Circle K Japan Co. Ltd. 572,568
15,000 Fuji Machine Manufacturing Co. 430,166
4,600 Keyence Corp. 670,402
32,000 Matsushita Electric Industrial
Co. 498,962
6,000 Rohm Co 592,360
10,000 Sony Corp. 854,065
62,000 Sumitomo Trust & Banking 409,042
------------
TOTAL JAPAN 5,207,271
------------
MEXICO--1.7%
20,000 Pan American Beverage, Class A 685,000
------------
NETHERLANDS--7.2%
3,600 Akzo Nobel N.V. 633,301
13,543 ING Groep, N.V. 550,634
19,650 Nutricia Verenigde Bedrijven N.V. 557,671
8,500 Philips Electronics N.V. 561,591
12,500 PolyGram N.V. 632,139
------------
TOTAL NETHERLANDS 2,935,336
------------
NEW ZEALAND--0.9%
27,100 Tranz Rail Holdings Ltd., ADR 353,994
------------
PORTUGAL--2.4%
20,800 Banco Commercial Portugues,
Class R 438,624
11,900 Portugal Telecom SA, ADR 545,912
------------
TOTAL PORTUGAL 984,536
------------
SPAIN--4.8%
30,100 Banco de Santander 910,409
10,600 Mapfre Vida Seguras 654,014
8,800 Repsol SA 380,659
------------
TOTAL SPAIN 1,945,082
------------
</TABLE>
<PAGE>
FTI INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
SWEDEN--2.9%
30,700 SSAB Svenskt Stal AB, Class B $ 524,820
26,000 Sparbanken Sverige (SwedBank) 661,659
------------
TOTAL SWEDEN 1,186,479
------------
SWITZERLAND--4.7%
770 Clariant AG 634,556
416 Novartis AG 664,643
68 (a) Roche Holding AG 608,557
------------
TOTAL SWITZERLAND 1,907,756
------------
UNITED KINGDOM--19.8%
124,000 Amvescap PLC 896,334
54,000 Argos PLC 564,532
22,484 British Aerospace 613,648
40,562 British Petroleum Co. PLC 554,892
90,000 Compass Group 1,074,648
48,000 Hays PLC 591,791
78,520 Lloyds TSB Group PLC 895,134
8,000 Misys PLC 226,313
33,000 Reed International PLC 351,401
152,000 Rentokil Initial PLC 640,499
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (continued)
UNITED KINGDOM (continued)
39,237 Siebe PLC $ 713,700
104,631 Smithkline Beecham Corp. 971,098
------------
TOTAL UNITED KINGDOM 8,093,990
------------
TOTAL COMMON STOCKS (identified
cost $34,863,144) 38,833,704
------------
PREFERRED STOCKS--2.2%
GERMANY--2.2%
2,600 Fresenius AG, Pfd. 440,828
7,500 Henkel KGAA, Pfd. 461,015
------------
TOTAL PREFERRED STOCKS
(identified cost $953,189) 901,843
------------
(B) REPURCHASE AGREEMENTS--2.8%
$ 1,124,000 J.P. Morgan & Co., Inc., 4.65%,
dated 11/28/1997, due
12/1/1997 (at amortized cost) 1,124,000
------------
TOTAL INVESTMENTS (identified
cost $36,940,333)(c) $ 40,859,547
============
</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 $36,940,333. The
net unrealized appreciation of investments on a federal tax basis amounts to
$3,919,214 which is comprised of $5,499,597 appreciation and $1,580,383
depreciation at November 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($40,869,501) at November 30, 1997.
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
ADR -- American Depository Receipt
PLC -- Public Limited Company
SA -- Support Agreement
SPA -- Standby Purchase Agreement
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
FTI INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $36,940,333) $40,859,547
- --------------------------------------------------------------------------------
Cash 567,947
- --------------------------------------------------------------------------------
Cash denominated in foreign currencies (at identified cost $287,016) 287,905
- --------------------------------------------------------------------------------
Income receivable 72,693
- --------------------------------------------------------------------------------
Receivable for investments sold 1,055
- --------------------------------------------------------------------------------
Net receivable for foreign currency exchange contracts sold 120,293
- --------------------------------------------------------------------------------
Deferred organizational costs 27,636
- -------------------------------------------------------------------------------- -----------
Total assets 41,937,076
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased $964,104
- ---------------------------------------------------------------------
Payable for taxes withheld 7,564
- ---------------------------------------------------------------------
Accrued expenses 95,907
- --------------------------------------------------------------------- --------
Total liabilities 1,067,575
- -------------------------------------------------------------------------------- -----------
Net Assets for 3,349,788 shares outstanding $40,869,501
- -------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid in capital $37,877,907
- --------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and
liabilities in foreign currency 4,043,746
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (1,231,385)
- --------------------------------------------------------------------------------
Undistributed net investment income 179,233
- -------------------------------------------------------------------------------- -----------
Total Net Assets $40,869,501
- -------------------------------------------------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------
$40,869,501 / 3,349,788 shares outstanding $12.20
- -------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
FTI INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $55,293) $ 444,674
- ---------------------------------------------------------------------------------
Interest 111,467
- --------------------------------------------------------------------------------- ----------
Total income 556,141
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee $ 321,927
- ---------------------------------------------------------------------
Administrative personnel and services fee 75,000
- ---------------------------------------------------------------------
Custodian fees 36,653
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 15,757
- ---------------------------------------------------------------------
Directors'/Trustees' fees 5,573
- ---------------------------------------------------------------------
Auditing fees 20,419
- ---------------------------------------------------------------------
Legal fees 2,312
- ---------------------------------------------------------------------
Portfolio accounting fees 43,531
- ---------------------------------------------------------------------
Share registration costs 15,748
- ---------------------------------------------------------------------
Printing and postage 7,440
- ---------------------------------------------------------------------
Insurance premiums 2,497
- ---------------------------------------------------------------------
Miscellaneous 8,798
- --------------------------------------------------------------------- ---------
Total expenses 555,655
- ---------------------------------------------------------------------
Reimbursements--
- ---------------------------------------------------------------------
Reimbursement of operating expenses (40,575)
- --------------------------------------------------------------------- ---------
Net expenses 515,080
- --------------------------------------------------------------------------------- ----------
Net investment income 41,061
- --------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY:
- ---------------------------------------------------------------------------------
Net realized loss on investments and foreign currency transactions (837,237)
- ---------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets
and liabilities in foreign currency 3,517,440
- --------------------------------------------------------------------------------- ----------
Net realized and unrealized gain on investments and foreign
currency 2,680,203
- --------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $2,721,264
- --------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
FTI INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------
Net investment income $ 41,061 $ 2,792
- --------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency
transactions (($1,111,192) and ($119,531), respectively, as
computed for federal tax purposes) (837,237) 52,073
- --------------------------------------------------------------
Net change in unrealized appreciation of investments and
translation of assets and liabilities in foreign currency 3,517,440 526,306
- -------------------------------------------------------------- ----------- -----------
Change in net assets resulting from operations 2,721,264 581,171
- -------------------------------------------------------------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------
Distributions from net investment income (302,675) (8,166)
- -------------------------------------------------------------- ----------- -----------
SHARE TRANSACTIONS--
- --------------------------------------------------------------
Proceeds from sale of shares 29,812,212 11,857,000
- --------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 130,938 363
- --------------------------------------------------------------
Cost of shares redeemed (3,557,689) (364,917)
- -------------------------------------------------------------- ----------- -----------
Change in net assets resulting from share transactions 26,385,461 11,492,446
- -------------------------------------------------------------- ----------- -----------
Change in net assets 28,804,050 12,065,451
- --------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------
Beginning of period 12,065,451 --
- -------------------------------------------------------------- ----------- -----------
End of period (including undistributed net investment income
of $179,233 and $168,457, respectively) $40,869,501 $12,065,451
- -------------------------------------------------------------- ----------- -----------
</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)
<PAGE>
FTI INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.99 $10.00
- --------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------
Net investment income 0.02 0.01(b)
- --------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency 1.39 0.99
- -------------------------------------------------------------- --------- ---------
Total from investment operations 1.41 1.00
- -------------------------------------------------------------- --------- ---------
LESS DISTRIBUTIONS
- --------------------------------------------------------------
Distributions from net investment income (0.20) (0.01)
- -------------------------------------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $12.20 $10.99
- -------------------------------------------------------------- --------- ---------
TOTAL RETURN (C) 13.01% 10.04%
- --------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------
Expenses 1.60% 1.68%*
- --------------------------------------------------------------
Net investment income 0.13% 0.05%*
- --------------------------------------------------------------
Expense waiver/reimbursement (d) 0.13% 3.05%*
- --------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------
Net assets, end of period (000 omitted) $40,869 $12,065
- --------------------------------------------------------------
Average commission rate paid (e) $0.0363 $0.0365
- --------------------------------------------------------------
Portfolio turnover 55% 29%
- --------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from December 22, 1995 (start of
performance) to November 30, 1996.
(b) Per share information is based on average shares outstanding.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) 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)
<PAGE>
FTI INTERNATIONAL BOND FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
- ----------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS--8.6%
GERMANY--3.6%
FINANCE--3.6%
180,000,000 (a)Bayerische Landesbank
Girozentrale, Unsub.,
7.50%, 2/11/1999 $ 106,668
23,300,000 (b)Deutsche Siedlungs LB,
Deb., 8.75%, 10/14/1998 161,437
-------------
TOTAL GERMANY 268,105
-------------
JAPAN--1.2%
FINANCE--1.2%
10,000,000 Export-Import Bank Japan,
Foreign Gov't. Guarantee,
2.875%, 7/28/2005 84,231
-------------
SWEDEN--3.8%
FINANCE--3.8%
2,000,000 Statens Bostads, 10.25%,
5/5/2000 282,883
-------------
TOTAL CORPORATE BONDS
(identified cost $743,667) 635,219
----------
GOVERNMENT AGENCIES--75.2%
AUSTRALIA--2.8%
115,000 (c)Treasury Corp. of
Victoria, Local Gov't.
Guarantee, 8.75%, 7/9/2003 207,819
-------------
BELGIUM--4.6%
2,000,000 (d)Belgium Kingdom, 5.75%,
3/28/2008 341,636
-------------
CANADA--4.5%
420,000 Canada, Government of, 7.25%,
6/1/2007 330,403
-------------
DENMARK--3.2%
1,380,000 Kingdom of Denmark, 8.00%,
3/15/2006 234,825
-------------
FINLAND--4.7%
1,700,000 Finland (Government of),
6.00%, 4/25/2008 344,123
-------------
GERMANY--21.4%
300,000 Bundesobligation, 5.75%,
8/22/2000 175,220
240,000 Deutsche Bundespost, (German
Post Office), 7.50%,
12/2/2002 149,716
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
- ----------------------------------------------------------
<C> <S> <C>
GOVERNMENT AGENCIES (continued)
GERMANY (continued)
50,000 Deutschland Republic, Deb.,
6.25%, 1/4/2024 $ 29,166
250,000 Germany (Fed Republic),
6.00%, 1/4/2007 147,434
746,000 Germany (Fed Republic),
6.00%, 1/5/2006 438,970
130,000 Germany Unity Fund, 8.00%,
1/21/2002 82,084
240,000 Germany Unity Fund, 8.50%,
2/20/2001 151,104
100,000 Germany, 8.00%, 7/22/2002 63,584
560,000 Treuhandanstalt, 7.125%,
1/29/2003 346,162
-------------
TOTAL GERMANY 1,583,440
-------------
ITALY--4.3%
400,000,000 Buoni Poliennali Del Tes,
Deb., 10.50%, 7/15/1998 237,723
100,000,000 Italy (Republic of), 9.00%,
11/1/2023 76,790
-------------
TOTAL ITALY 314,513
-------------
JAPAN--4.7%
28,300,000 Japan, 3.40%, 3/22/2004 246,335
11,000,000 Japan, 6.40%, 3/20/2001 101,739
-------------
TOTAL JAPAN 348,074
-------------
SUPRANATIONAL--4.9%
205,000 European Investment Bank, Sr.
Unsub., 8.00%, 6/10/2003 358,992
-------------
SWEDEN--0.4%
200,000 Sweden (Kingdom of), 10.25%,
5/5/2000 28,537
-------------
UNITED KINGDOM--7.5%
157,000 United Kingdom Treasury,
7.50%, 12/7/2006 282,144
141,000 United Kingdom Treasury,
8.00%, 12/7/2015 276,385
-------------
TOTAL UNITED KINGDOM 558,529
-------------
UNITED STATES--12.2%
$ 3,200,000 Republic of Austria, 7.00%,
9/20/1999 268,311
</TABLE>
<PAGE>
FTI INTERNATIONAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
- ----------------------------------------------------------
<C> <S> <C>
GOVERNMENT AGENCIES (continued)
UNITED STATES (continued)
530,000 Tennessee Valley Authority,
6.375%, 9/18/2006 $ 315,114
210,000 United States Treasury Bill,
12/11/1997 209,712
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
- ----------------------------------------------------------
<C> <S> <C>
GOVERNMENT AGENCIES (continued)
UNITED STATES (continued)
$ 105,000 United States Treasury Bond,
6.25%, 8/15/2023 $ 106,476
------------
TOTAL UNITED STATES 899,613
------------
TOTAL GOVERNMENT AGENCIES
(identified cost
$5,522,259) 5,550,504
------------
TOTAL INVESTMENTS (identified
cost $6,265,926)(e) $ 6,185,723
===========
</TABLE>
(a) Denominated in Italian Lira.
(b) Denominated in Spanish Peseta.
(c) Denominated in British Pound.
(d) Denominated in French Franc.
(e) The cost of investments for federal tax purposes amounts to $6,274,180. The
net unrealized depreciation of investments on a federal tax basis amounts to
$88,457 which is comprised of $87,478 appreciation and $175,935 depreciation
at November 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($7,381,413) at November 30, 1997.
(See Notes which are an integral part of the Financial Statements)
<PAGE>
FTI INTERNATIONAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Total investments in securities, at value (identified cost $6,265,926 and tax
cost $6,274,180) $6,185,723
- ---------------------------------------------------------------------------------
Cash 74,977
- ---------------------------------------------------------------------------------
Cash denominated in foreign currencies (at identified cost $51,226) 52,275
- ---------------------------------------------------------------------------------
Income receivable 202,004
- ---------------------------------------------------------------------------------
Receivable for investments sold 1,602,898
- ---------------------------------------------------------------------------------
Deferred organizational costs 27,640
- --------------------------------------------------------------------------------- ----------
Total assets 8,145,517
- ---------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------
Payable for investments purchased $711,732
- ----------------------------------------------------------------------
Net payable for foreign currency exchange contracts purchased 22,588
- ----------------------------------------------------------------------
Accrued expenses 29,784
- ---------------------------------------------------------------------- --------
Total liabilities 764,104
- --------------------------------------------------------------------------------- ----------
NET ASSETS for 793,422 shares outstanding $7,381,413
- --------------------------------------------------------------------------------- ----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------
Paid in capital $7,551,563
- ---------------------------------------------------------------------------------
Net unrealized depreciation of investments and translation of assets
and liabilities in foreign currency (109,809)
- ---------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (330)
- ---------------------------------------------------------------------------------
Undistributed net investment income (60,011)
- --------------------------------------------------------------------------------- ----------
Total Net Assets $7,381,413
- --------------------------------------------------------------------------------- ----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------
$7,381,413 / 793,422 shares outstanding $9.30
- --------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
FTI INTERNATIONAL BOND FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------
Interest (net of foreign taxes withheld on $2,808) $ 445,811
- ----------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------
Investment advisory fee $ 47,032
- ----------------------------------------------------------------------
Administrative personnel and services fee 75,000
- ----------------------------------------------------------------------
Custodian fees 7,975
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 16,100
- ----------------------------------------------------------------------
Directors'/Trustees' fees 1,809
- ----------------------------------------------------------------------
Auditing fees 20,419
- ----------------------------------------------------------------------
Legal fees 3,282
- ----------------------------------------------------------------------
Portfolio accounting fees 44,821
- ----------------------------------------------------------------------
Share registration costs 5,637
- ----------------------------------------------------------------------
Printing and postage 8,673
- ----------------------------------------------------------------------
Insurance premiums 2,296
- ----------------------------------------------------------------------
Miscellaneous 5,759
- ---------------------------------------------------------------------- ---------
Total expenses 238,803
- ----------------------------------------------------------------------
Reimbursement of other operating expenses (158,178)
- ---------------------------------------------------------------------- ---------
Net expenses 80,625
- ---------------------------------------------------------------------------------- ---------
Net investment income 365,186
- ---------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY:
- ----------------------------------------------------------------------------------
Net realized loss on investments and foreign currency transactions (356,351)
- ----------------------------------------------------------------------------------
Net change in unrealized depreciation of investments and translation of assets and
liabilities in foreign currency (247,489)
- ---------------------------------------------------------------------------------- ---------
Net realized and unrealized loss on investments and foreign
currency (603,840)
- ---------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $(238,654)
- ---------------------------------------------------------------------------------- ---------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
FTI INTERNATIONAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------
Net investment income $ 365,186 $ 200,313
- --------------------------------------------------------------
Net realized loss on investments and foreign currency
transactions ($17,857 and ($13,444), respectively, as computed
for federal tax purposes) (356,351) (133,892)
- --------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments and translation of assets and liabilities in
foreign currency (247,489) 137,680
- -------------------------------------------------------------- ------------ ------------
Change in net assets resulting from operations (238,654) 204,101
- -------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------
Distributions from net investment income (84,162) (69,302)
- --------------------------------------------------------------
Return of capital distributions (148,955) --
- -------------------------------------------------------------- ------------ ------------
Total distributions (233,117) (69,302)
- -------------------------------------------------------------- ------------ ------------
SHARE TRANSACTIONS--
- --------------------------------------------------------------
Proceeds from sale of shares 4,413,775 5,549,752
- --------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 25,804 --
- --------------------------------------------------------------
Cost of shares redeemed (1,788,288) (482,658)
- -------------------------------------------------------------- ------------ ------------
Change in net assets resulting from share transactions 2,651,291 5,067,094
- -------------------------------------------------------------- ------------ ------------
Change in net assets 2,179,520 5,201,893
- --------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------
Beginning of period 5,201,893 --
- -------------------------------------------------------------- ------------ ------------
End of period (including undistributed net investment income
of $0 and $12,700, respectively) $ 7,381,413 $ 5,201,893
- -------------------------------------------------------------- ------------ ------------
</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)
<PAGE>
FTI INTERNATIONAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
------------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.20 $ 10.00
- --------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------
Net investment income 0.50 0.47(b)
- --------------------------------------------------------------
Net realized and unrealized loss on investments and foreign
currency (1.04) (0.10)
- -------------------------------------------------------------- --------- ---------
Total from investment operations (0.54) 0.37
- -------------------------------------------------------------- --------- ---------
LESS DISTRIBUTIONS
- --------------------------------------------------------------
Distributions from net investment income (0.13) (0.17)
- --------------------------------------------------------------
Return of capital distributions (0.23) --
- -------------------------------------------------------------- --------- ---------
Total distributions (0.36) (0.17)
- -------------------------------------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 9.30 $ 10.20
- -------------------------------------------------------------- --------- ---------
TOTAL RETURN (C) (5.43%) 3.75%
- --------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------
Expenses 1.20% 1.20%*
- --------------------------------------------------------------
Net investment income 5.44% 5.46%*
- --------------------------------------------------------------
Expense waiver/reimbursement (d) 2.35% 4.63%*
- --------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------
Net assets, end of period (000 omitted) $ 7,381 $ 5,201
- --------------------------------------------------------------
Portfolio turnover 184% 190%
- --------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from December 22, 1995 (start of
performance) to November 30, 1996.
(b) Per share information is based on average shares outstanding.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
<PAGE>
FTI GLOBAL BOND FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN VALUE IN
CURRENCY U.S.
PAR AMOUNT DOLLARS
- --------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS--7.8%
GERMANY--1.7%
FINANCE--1.7%
40,000,000 (a)Bayerische Landesbank
Girozentrale, Unsub.,
7.50%, 2/11/1999 $ 23,704
-------------
ITALY--4.1%
FINANCE--4.1%
70,000,000 Italy (Republic of), Bond,
6.25%, 3/1/2002 41,784
20,000,000 Italy (Republic of), Bond,
9.00%, 11/1/2023 15,358
-------------
TOTAL 57,142
-------------
SWEDEN--2.0%
FINANCE--2.0%
200,000 Statens Bostads, Bond,
10.25%, 5/5/2000 28,287
-------------
TOTAL CORPORATE BONDS
(identified cost $114,581) 109,133
-------------
GOVERNMENT AGENCIES--85.9%
AUSTRIA--4.8%
800,000 Republic of Austria, Bond,
7.00%, 9/20/1999 67,078
-------------
AUSTRALIA--2.6%
20,000 (b)Treasury Corp. of
Victoria, Local Gov't.
Guarantee, 8.75%, 7/9/2003 36,142
-------------
CANADA--1.1%
15,000 (c)Canada, Government of,
Bond, 6.75%, 8/28/2006 15,595
-------------
DENMARK--2.4%
200,000 Denmark, Bond, 8.00%,
3/15/2006 34,033
-------------
FINLAND--4.1%
300,000 Finland (Govt of), Bond,
6.00%, 4/25/2008 57,357
-------------
GERMANY--6.5%
50,000 Bundesobligation, Bond,
5.75%, 8/22/2000 29,203
50,000 Deutsche Bundespost, Bond,
7.50%, 12/2/2002 31,191
</TABLE>
<TABLE>
<CAPTION>
FOREIGN
CURRENCY
PAR AMOUNT
OR PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- ----------------------------------------------------------
<C> <S> <C>
GOVERNMENT AGENCIES (continued)
GERMANY (continued)
31,000 Deutschland Republic, Deb.,
6.25%, 1/4/2024 $ 18,083
20,000 Germany Unity Fund, Bond,
8.50%, 2/20/2001 12,592
------------
TOTAL 91,069
------------
JAPAN--6.3%
9,700,000 Japan, Bond, 6.40%, 3/20/2001 89,715
------------
SUPRANATIONAL--1.3%
10,000 (b)European Investment Bank,
Sr. Unsub., 8.00%, 6/10/2003 17,512
------------
SWEDEN--4.1%
400,000 Sweden (Kingdom of), 10.25%,
5/5/2000 57,074
------------
UNITED KINGDOM--7.2%
16,000 United Kingdom Treasury, Bond,
7.50%, 12/7/2006 28,754
37,000 United Kingdom Treasury, Bond,
8.00%, 12/7/2015 72,527
------------
TOTAL 101,281
------------
UNITED STATES--45.5%
$ 30,000 Government National Mortgage
Association, Pool, 7.00%, TBA 30,084
95,000 (d)Tennessee Valley Authority,
Bond, 6.375%, 9/18/2006 56,483
50,000 United States Treasury Bond,
6.25%, 8/15/2023 50,703
20,000 United States Treasury Bond,
6.375%, 8/15/2027 20,763
18,000 United States Treasury Bond,
6.625%, 2/15/2027 19,237
35,000 United States Treasury Bond,
8.125%, 8/15/2019 43,203
</TABLE>
<PAGE>
FTI GLOBAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- ----------------------------------------------------------
<C> <S> <C>
GOVERNMENT AGENCIES (continued)
UNITED STATES (continued)
$ 20,000 United States Treasury Note,
5.625%, 11/30/2000 $ 19,881
50,000 United States Treasury Note,
6.25%, 6/30/2002 50,776
35,000 United States Treasury Note,
6.375%, 8/15/2002 35,700
150,000 United States Treasury Note,
6.50%, 10/15/2006 155,813
40,000 United States Treasury Note,
6.875%, 3/31/2000 40,913
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- ----------------------------------------------------------
<C> <S> <C>
GOVERNMENT AGENCIES (continued)
UNITED STATES (continued)
$ 107,000 United States Treasury Note,
7.00%, 7/15/2006 $ 114,624
------------
TOTAL UNITED STATES 638,180
------------
TOTAL GOVERNMENT AGENCIES
(identified cost $1,187,735) 1,205,036
------------
(E) REPURCHASE AGREEMENT--1.4%
20,000 J.P. Morgan & Co., Inc., 4.65%,
dated 11/28/1997, due
12/1/1997 (at amortized cost) 20,000
------------
TOTAL INVESTMENTS (identified
cost $1,322,316)(f) $ 1,334,169
============
</TABLE>
(a) Denominated in Italian Lira.
(b) Denominated in British Pound.
(c) Denominated in U.S. Dollars.
(d) Denominated in Deutsche Mark.
(e) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(f) The cost of investments for federal tax purposes amounts to $1,322,316. The
net unrealized appreciation of investments on a federal tax basis amounts to
$11,853 which is comprised of $29,063 appreciation and $17,210 depreciation
at November 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($1,402,113) at November 30, 1997.
The following acronym is used throughout this portfolio:
TBA -- To Be Announced
(See Notes which are an integral part of the Financial Statements)
<PAGE>
FTI GLOBAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost
$1,322,316) $1,334,169
- ---------------------------------------------------------------------------------
Cash 18,069
- ---------------------------------------------------------------------------------
Income receivable 30,759
- ---------------------------------------------------------------------------------
Receivable for investments sold 232,057
- ---------------------------------------------------------------------------------
Deferred organizational costs 30,997
- --------------------------------------------------------------------------------- ----------
Total assets 1,646,051
- --------------------------------------------------------------------------------- ----------
LIABILITIES:
- ----------------------------------------------------------------------
Payable for investments purchased $216,610
- ----------------------------------------------------------------------
Net payable for foreign currency exchange contracts purchased 1,465
- ----------------------------------------------------------------------
Accrued expenses 25,863
- ---------------------------------------------------------------------- --------
Total liabilities 243,938
- --------------------------------------------------------------------------------- ----------
Net Assets for 145,310 shares outstanding $1,402,113
- --------------------------------------------------------------------------------- ----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------
Paid in capital $1,402,811
- ---------------------------------------------------------------------------------
Net unrealized depreciation of investments and translation of assets
and liabilities in foreign currency 10,357
- ---------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions 861
- ---------------------------------------------------------------------------------
Undistributed net investment income (11,916)
- --------------------------------------------------------------------------------- ----------
Total Net Assets $1,402,113
- --------------------------------------------------------------------------------- ----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------
$1,402,113 / 145,310 shares outstanding $9.65
- --------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
FTI GLOBAL BOND FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $308) $ 89,570
- ------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------
Investment advisory fee $ 9,468
- -----------------------------------------------------------------------
Administrative personnel and services fee 75,000
- -----------------------------------------------------------------------
Custodian fees 7,250
- -----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 12,818
- -----------------------------------------------------------------------
Directors'/Trustees' fees 400
- -----------------------------------------------------------------------
Auditing fees 20,419
- -----------------------------------------------------------------------
Legal fees 2,638
- -----------------------------------------------------------------------
Portfolio accounting fees 47,546
- -----------------------------------------------------------------------
Share registration costs 8,284
- -----------------------------------------------------------------------
Printing and postage 6,950
- -----------------------------------------------------------------------
Insurance premiums 2,873
- -----------------------------------------------------------------------
Miscellaneous 5,737
- ----------------------------------------------------------------------- ---------
Total expenses 199,383
- -----------------------------------------------------------------------
Waivers and reimbursements--
- -----------------------------------------------------------------------
Waiver of custodian fees (7,250)
- -----------------------------------------------------------
Reimbursement of other operating expenses (185,371)
- ----------------------------------------------------------- ---------
Total waivers and reimbursements (192,621)
- ----------------------------------------------------------------------- ---------
Net expenses 6,762
- ------------------------------------------------------------------------------------ ---------
Net investment income 82,808
- ------------------------------------------------------------------------------------ ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- ------------------------------------------------------------------------------------
Net realized loss on investments and foreign currency transactions (77,578)
- ------------------------------------------------------------------------------------
Net change in unrealized depreciation of investments and translation of assets and
liabilities in foreign currency (9,566)
- ------------------------------------------------------------------------------------ ---------
Net realized and unrealized loss on investments and foreign currency (87,144)
- ------------------------------------------------------------------------------------ ---------
Change in net assets resulting from operations $ (4,336)
- ------------------------------------------------------------------------------------ ---------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
FTI GLOBAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------
Net investment income $ 82,808 $ 37,107
- ---------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency transactions ($861
and $3,639, respectively, as computed for federal tax
purposes) (77,578) 3,629
- ---------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments and translation of assets and liabilities in
foreign currency (9,566) 19,923
- --------------------------------------------------------------- ------------ ------------
Change in net assets resulting from operations (4,336) 60,659
- --------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------
Distributions from net investment income (44,222) (7,731)
- ---------------------------------------------------------------
Return of capital distributions (34,838) --
- ---------------------------------------------------------------
Distributions from net realized gains on investments and
foreign currency transactions (3,639) --
- --------------------------------------------------------------- ------------ ------------
Total distributions (82,699) (7,731)
- --------------------------------------------------------------- ------------ ------------
SHARE TRANSACTIONS--
- ---------------------------------------------------------------
Proceeds from sale of shares 400,500 1,428,150
- ---------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 40,772 770
- ---------------------------------------------------------------
Cost of shares redeemed (10,000) (423,972)
- --------------------------------------------------------------- ------------ ------------
Change in net assets resulting from share transactions 431,272 1,004,948
- --------------------------------------------------------------- ------------ ------------
Change in net assets 344,237 1,057,876
- ---------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------
Beginning of period 1,057,876 --
- --------------------------------------------------------------- ------------ ------------
End of period (including undistributed net investment income of
$(11,916) and $29,366, respectively) $1,402,113 $1,057,876
- --------------------------------------------------------------- ------------ ------------
</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)
<PAGE>
FTI GLOBAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996(A)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.42 $10.00
- ---------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------
Net investment income 0.62 0.37
- ---------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency (0.66) 0.13
- --------------------------------------------------------------- --------- ---------
Total from investment operations (0.04) 0.50
- --------------------------------------------------------------- --------- ---------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------
Distributions from net investment income (0.39) (0.08)
- ---------------------------------------------------------------
Return of capital distributions (0.30) --
- ---------------------------------------------------------------
Distributions from net realized gain on investments and
foreign currency transactions (0.04) --
- --------------------------------------------------------------- --------- ---------
Total distributions (0.73) (0.08)
- --------------------------------------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 9.65 $10.42
- --------------------------------------------------------------- --------- ---------
TOTAL RETURN (B) (0.42%) 5.02%
- ---------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------
Expenses 0.50% 0.95%*
- ---------------------------------------------------------------
Net investment income 6.12% 5.83%*
- ---------------------------------------------------------------
Expense waiver/reimbursement (c) 14.24% 26.94%*
- ---------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------
Net assets, end of period (000 omitted) $1,402 $1,058
- ---------------------------------------------------------------
Portfolio turnover 176% 287%
- ---------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from December 22, 1995 (start of
performance) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
<PAGE>
FTI FUNDS
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
(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 principal.
("Small Capitalization Equity Fund")
FTI International Equity Fund To provide growth of principal.
("International Equity Fund")
FTI International Bond Fund To provide total return.
("International Bond Fund")
FTI Global Bond Fund ("Global Bond Fund") To provide total return.
</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 valuation of 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.
<PAGE>
FTI FUNDS
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--It is the policy of the Funds to require the
custodian bank or broker 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 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.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions and net operating losses. The following
reclassifications have been made to the financial statements.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
------------------------------------------------
UNDISTRIBUTED NET
INVESTMENT
ACCUMULATED INCOME/ACCUMULATED
NET DISTRIBUTIONS IN
PAID-IN REALIZED EXCESS OF NET
FUND NAME CAPITAL GAIN/LOSS INVESTMENT INCOME
---------------------------------- --------- ----------- ------------------
<S> <C> <C> <C>
International Equity Fund $ 2,227 $(274,617) $ 272,390
International Bond Fund (166,822) 371,602 (204,780)
Global Bond Fund (33,409) (45,030) 78,439
</TABLE>
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
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.
<PAGE>
FTI FUNDS
- --------------------------------------------------------------------------------
At November 30, 1997, International Equity Fund, for federal tax purposes,
had a capital loss carryforward, as noted below, which will reduce the
International Equity Fund's 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 International Equity Fund of any
liability for federal tax.
<TABLE>
<CAPTION>
EXPIRING EXPIRING TOTAL TAX
FUND IN 2004 IN 2005 LOSS CARRYFORWARD
------------------------------------ -------- ---------- ------------------
<S> <C> <C> <C>
International Equity Fund $119,531 $1,111,907 $1,231,438
</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.
DEFERRED EXPENSES--The costs incurred by each Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized over a period not to exceed five years from each Fund's
commencement date.
FOREIGN EXCHANGE CONTRACTS--The Funds may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. Purchased 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 purposes as unrealized
until the settlement date.
<PAGE>
FTI FUNDS
- --------------------------------------------------------------------------------
At November 30, 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)
--------------- ------------------------ ----------- ------------ --------------
<S> <C> <C> <C> <C>
CONTRACTS PURCHASED:
12/1/97 377,789 Pound Sterling $ 639,578 $ 638,047 $ (1,531)
12/1/97 23,922 Pound Sterling 40,224 40,401 177
CONTRACTS SOLD:
2/20/98 2,040,658 Deutsche Mark $1,186,378 $1,162,767 $ 23,611
2/20/98 6,840,520 French Franc 1,186,560 1,164,629 21,931
12/10/97 236,820,000 Japanese Yen 1,933,224 1,859,713 73,511
2/20/98 2,373,828 Netherlands
Guilder 1,224,254 1,200,450 23,804
12/10/97 1,092,922 Swiss Franc 746,531 767,741 (21,210)
--------
Net Unrealized Appreciation on Foreign Exchange
Contracts $120,293
========
</TABLE>
<PAGE>
FTI FUNDS
- --------------------------------------------------------------------------------
INTERNATIONAL BOND FUND
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN EXCHANGE CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
--------------- ---------------------------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
CONTRACTS PURCHASED:
2/23/98 845,000 Austrian Schilling $ 68,543 $ 68,415 $ (128)
12/18/97 219,000 Australian Dollar 152,786 149,635 (3,151)
12/19/97 1,032,000 Canadian Dollar 730,361 725,474 (4,887)
2/20/98 1,779,000 Deutsche Mark 1,016,895 1,013,675 (3,220)
12/2/97 1,796,027 Finnish Markka 336,492 336,880 388
12/2/97 2,096,940 French Franc 356,309 355,215 (1,094)
12/19/97 1,173,535,000 Italian Lira 680,942 679,290 (1,652)
12/10/97 139,933,000 Japanese Yen 1,144,178 1,098,874 (45,304)
2/17/98 25,879,000 Spanish Peseta 178,846 173,921 (4,925)
CONTRACTS SOLD:
2/23/98 3,352,000 Austrian Schilling $ 277,483 $ 271,392 $ 6,091
12/2/97 844,258 Austrian Schilling 68,146 68,033 113
1/14/98 707,000 Danish Krone 108,095 105,600 2,495
12/2/97 1,529,360 Deutsche Mark 868,392 867,230 1,162
2/20/98 1,833,000 Deutsche Mark 1,067,187 1,044,792 22,395
2/27/98 1,796,000 Finnish Markka 338,230 338,723 (493)
2/20/98 2,097,000 French Franc 358,033 357,024 1,009
12/19/97 355,790,000 Italian Lira 209,134 205,872 3,262
12/2/97 1,173,535,000 Italian Lira 681,100 679,302 1,798
12/10/97 20,304,000 Japanese Yen 162,601 159,444 3,157
12/8/97 152,000 Pound Sterling 256,361 256,599 (238)
2/13/98 161,000 Swedish Krona 21,538 20,904 634
--------
Net Unrealized Depreciation on Foreign
Exchange Contracts $(22,588)
========
</TABLE>
<PAGE>
FTI FUNDS
- --------------------------------------------------------------------------------
GLOBAL BOND FUND
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN EXCHANGE CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
--------------- ----------------------------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
CONTRACTS PURCHASED:
12/18/97 38,000 Australian Dollar $ 26,511 $ 25,964 $ (547)
12/19/97 191,000 Canadian Dollar 135,173 134,269 (904)
2/20/98 54,000 Deutsche Mark 31,250 30,769 (481)
12/2/97 316,946 Finnish Markka 59,381 59,449 68
12/1/97 3,756,114 Japanese Yen 29,482 29,431 (51)
12/10/97 13,610,000 Japanese Yen 111,284 106,877 (4,407)
2/17/98 5,275,000 Spanish Peseta 36,455 35,451 (1,004)
CONTRACTS SOLD:
2/23/98 1,675,000 Austrian Schilling $ 138,659 $135,615 $ 3,044
1/14/98 62,000 Danish Krone 9,411 9,260 151
2/20/98 4,000 Deutsche Mark 2,329 2,279 50
2/27/98 317,000 Finnish Markka 59,699 59,786 (87)
2/20/98 85,595,000 Italian Lira 50,313 49,528 785
12/10/97 7,339,000 Japanese Yen 58,210 57,632 578
12/8/97 34,000 Pound Sterling 57,341 57,397 (56)
2/13/98 354,000 Swedish Krona 47,358 45,962 1,396
--------
Net Unrealized Depreciation on Foreign
Exchange Contracts $ (1,465)
========
</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 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.
<PAGE>
FTI FUNDS
- --------------------------------------------------------------------------------
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
---------------------------- ----------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1997 1996 (A) 1997 1996 (A)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold 1,708,722 1,795,446 2,541,714 1,131,990
- ------------------------------
Shares issued to shareholders
in payment of distributions
declared -- -- 11,515 34
- ------------------------------
Shares redeemed (489,606) (196,753) (301,180) (34,285)
- ------------------------------ ----------- ----------- ----------- -----------
Net change resulting from
share transactions 1,219,116 1,598,693 2,252,049 1,097,739
- ------------------------------ ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL BOND FUND GLOBAL BOND FUND
---------------------------- ----------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1997 1996 (A) 1997 1996 (A)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold 471,526 559,265 40,588 143,789
- ------------------------------
Shares issued to shareholders
in payment of distributions
declared 2,628 -- 4,198 79
- ------------------------------
Shares redeemed (190,941) (49,056) (966) (42,378)
- ------------------------------ ----------- ---------- --------- ----------
Net change resulting from
share transactions 283,213 510,209 43,820 101,490
- ------------------------------ ----------- ---------- --------- ----------
</TABLE>
(a) For the period from December 22, 1995 (start of performance) to November 30,
1996.
<PAGE>
FTI FUNDS
- --------------------------------------------------------------------------------
(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%
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International Equity Fund 1.00%
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International Bond Fund 0.70%
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Global Bond Fund 0.70%
-----------------------------------------------------------------
</TABLE>
The Adviser may voluntarily choose to reimburse certain operating expenses of
the Funds. The Adviser can modify or terminate this voluntary 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 the average daily net assets, annually, to compensate
Edgewood Services, Inc.
For the period ended November 30, 1997, the Funds did not incur a distribution
services fee.
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 November 30, 1997, the Fund shares 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
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.
<PAGE>
FTI FUNDS
- --------------------------------------------------------------------------------
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 of the Fund's effective date. For the year
ended November 30, 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 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
year ended November 30, 1997, were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
------------------------------------------------------ ----------- -----------
<S> <C> <C>
Small Capitalization Equity Fund $43,479,254 $30,666,508
------------------------------------------------------
International Equity Fund $42,236,021 $16,477,864
------------------------------------------------------
International Bond Fund $12,226,874 $10,493,595
------------------------------------------------------
Global Bond Fund $ 2,382,404 $ 1,986,601
------------------------------------------------------
</TABLE>
(6) 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.
<PAGE>
FTI FUNDS
- --------------------------------------------------------------------------------
At November 30, 1997, the diversification of industries for the International
Equity Fund was as follows:
<TABLE>
<CAPTION>
% OF
INDUSTRY NET ASSETS
-------------------------------------------------------- -------------------
<S> <C>
Aerospace 1.5%
Apparel & Textiles 3.8%
Automobiles 1.6%
Banks 13.4%
Building Construction 0.9%
Business Services 1.7%
Chemicals 4.7%
Conglomerates 3.0%
Drugs and Health Care 8.6%
Electric Utilities 2.8%
Electrical Equipment 1.4%
Electronics 5.3%
Financial Services 1.3%
Food & Beverages 4.0%
Gas Exploration 1.4%
Household Appliances Furnishings 4.7%
Industrial Machinery 1.1%
Insurance 2.1%
International Oil 1.4%
Leisure Time 2.6%
Miscellaneous 9.6%
Other Utilities 1.5%
Petroleum Services 2.5%
Photography 1.8%
Publishing 2.0%
Retail Trade 3.4%
Steel 1.3%
Telecommunication Services 2.6%
Telephone 3.4%
Toys, Amusements, Sporting Goods 1.5%
</TABLE>
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
FTI FUNDS:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of FTI Small Capitalization Equity Fund, FTI
International Equity Fund, FTI International Bond Fund, and FTI Global Bond Fund
(portfolios of FTI Funds) as of November 30, 1997, and the related statements of
operations for the year then ended, the statements of changes in net assets for
the periods then ended, and financial highlights for the periods presented.
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.
We conducted our audits in accordance with generally accepted auditing
standards. 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997, by correspondence with the custodian and brokers or other
appropriate auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. 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 FTI
Small Capitalization Equity Fund, FTI International Equity Fund, FTI
International Bond Fund, and FTI Global Bond Fund of FTI Funds at November 30,
1997, 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 the periods presented, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 26, 1998
<PAGE>
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
Peter A. Aron Edward C. Gonzales
Nancy L. Close Chairman, President and Treasurer
James C. Goodfellow C. Christine Thomson
Edward C. Gonzales Vice President and Assistant Treasurer
Burton J. Greenwald Jay S. Neuman
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.
A1. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The FTI Small
Capitalization Equity Fund (the "Fund") is represented by a solid line. The
Russell 2000 Index is represented by a dotted line and the Russell 2000 Growth
Index is represented by a broken line.The line graph is a visual representation
of a comparison of change in value of a $10,000 hypothetical investment in the
Fund, the Russell 2000 Index, and the Russell 2000 Growth Index. The "x" axis
reflects computation periods from 12/22/95 to 11/30/97. The "y" axis reflects
the cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to the Russell 200 Index and the
Russell 2000 Growth Index. The ending values were $14,370, $14,192, and $12,857,
respectively. The legend in the bottom quadrant of the graphic presentation
indicates the Fund's Average Annual Total Returns for the one-year period ended
11/30/97, and from the start of performance of the Fund (12/22/95) to 11/30/97.
The total returns were 18.96% and 20.52%, respectively.
A2. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The FTI
International Equity Fund (the "Fund") is represented by a solid line. The
Morgan Stanley Capital International Europe, Australia, and Far East Index
("MSCI EAFE") is represented by a dotted line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Fund and the MSCI EAFE. The "x" axis reflects computation
periods from 12/22/95 to 11/30/97. The "y" axis reflects the cost of the
investment. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the MSCI EAFE. The ending values were
$12,436 and $10,535, respectively. The legend in the bottom quadrant of the
graphic presentation indicates the Fund's Average Annual Total Returns for the
one-year period ended 11/30/97, and from the start of performance of the Fund
(12/22/95) to 11/30/97. The total returns were 13.01% and 11.88%, respectively.
A3. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The FTI
International Bond Fund (the "Fund") is represented by a solid line. The Salomon
Brothers Non-U.S. Dollar World Government Bond Index ("SBNUSDWGBI") is
represented by a dotted line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the Fund
and the SBNUSDWGBI. The "x" axis reflects computation periods from 12/22/95 to
11/30/97. The "y" axis reflects the cost of the investment. The right margin
reflects the ending value of the hypothetical investment in the Fund as compared
to the SBNUSDWGBI. The ending values were $9,812 and $10,096, respectively. The
legend in the bottom quadrant of the graphic presentation indicates the Fund's
Average Annual Total Returns for the one-year period ended 11/30/97, and from
the start of performance of the Fund (12/22/95) to 11/30/97. The total returns
were (5.43%) and (0.98%), respectively.
A4. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The FTI Global
Bond Fund (the "Fund") is represented by a solid line. The Salomon Brothers
World Government Bond Index ("SBWGBI") is represented by a dotted line. The line
graph is a visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Fund and the SBWGBI. The "x" axis reflects
computation periods from 12/22/95 to 11/30/97. The "y" axis reflects the cost of
the investment. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the SBWGBI. The ending values were $10,458
and $10,475, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the Fund's Average Annual Total Returns for the one-year
period ended 11/30/97, and from the start of performance of the Fund (12/22/95)
to 11/30/97. The total returns were (0.42%) and 2.33%, respectively.
