THE
FBR FAMILY OF FUNDS
---------------------------------------
FBR FINANCIAL SERVICES FUND
FBR SMALL CAP FINANCIAL FUND
FBR SMALL CAP GROWTH/VALUE FUND
FBR FUNDS (LOGO)
{GRAPHIC OMITTED}
SEMI-ANNUAL REPORT
APRIL 30, 1997
<PAGE>
THE
FBR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
FBR FINANCIAL SERVICES FUND
FBR SMALL CAP FINANCIAL FUND
FBR SMALL CAP GROWTH/VALUE FUND
LETTER TO SHAREHOLDERS
June 16, 1997
Dear Shareholders:
We are pleased to present the first semi-annual report of The FBR Family of
Funds. The FBR Family of Funds operates on an October fiscal year end. Enclosed
you will find detailed financial statements for our three funds, including
complete summaries of portfolio investments, for the period ended April 30,
1997.
The FBR Family of Funds commenced investment operations on January 3, 1997.
The initial net asset value ("NAV") of each fund was $12.00. On April 30, 1997,
the NAV of the FBR Financial Services Fund, FBR Small Cap Financial Fund and FBR
Small Cap Growth/Value Fund stood at $12.68, $12.74, and $11.70, respectively.
This represents a total investment return of 5.67% for FBR Financial Services
Fund, 6.17% for FBR Small Cap Financial Fund and minus 2.50% for FBR Small Cap
Growth/Value Fund. During this period total net assets grew from our seed
capital of $100,000 to over $17.1 million. We will provide more in-depth
commentary from the portfolio managers with our upcoming quarterly shareholder
communication.
We appreciate your investment in our funds, and would be pleased to respond
to any questions or comments. If you have any questions, please call The FBR
Family of Funds toll-free information line at 1-888-888-0025.
Sincerely,
/s/ ERIC F. BILLINGS
Eric F. Billings
Chairman
The FBR Family of Funds
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- --------------------------------------------------------------------------------
FBR FINANCIAL SERVICES FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 89.6%
BANKS - COMMERCIAL -- 8.4%
1,000 Amsouth Bancorp ..................... $ 52,750
2,000 Associated Banc-Corp ................ 74,500
2,500 First Bank Puerto Rico .............. 65,312
3,700 North Fork Bancorporation, Inc. ..... 146,612
1,500 Pacific Century Financial Corp. ..... 64,125
2,000 Southern National Corp.** ........... 78,500
3,100 Union Planters Corp. ................ 138,337
1,500 UnionBanCal Corp. ................... 85,875
----------
706,011
----------
BANKS - MONEY CENTER -- 15.8%
2,400 Bank of New York Co., Inc.** ........ 94,800
1,700 BankAmerica Corp. ................... 198,687
3,000 BankBoston Corp. .................... 218,250
2,700 Chase Manhattan Corp. ............... 250,087
1,300 Citicorp ............................ 146,413
4,100 First Chicago NBD Corp. ............. 230,625
800 J.P. Morgan & Co. Inc. .............. 81,500
1,200 Republic New York Corp. ............. 109,950
----------
1,330,312
----------
BANKS - SUPER REGIONAL -- 20.1%
1,600 Banc One Corp. ...................... 67,800
1,300 Comerica, Inc. ...................... 76,050
2,500 CoreStates Financial Corp. .......... 126,562
1,500 First Bank System, Inc. ............. 115,125
2,900 First Union Corp. ................... 243,600
1,400 Fleet Financial Group, Inc. ......... 85,400
2,500 Key Corp. ........................... 130,312
2,000 Mellon Bank Corp. ................... 166,250
3,300 NationsBank Corp. ................... 199,237
3,300 Norwest Corp. ....................... 164,587
3,800 PNCBank Corp. ....................... 156,275
600 Wells Fargo & Co. ................... 160,050
----------
1,691,248
----------
FINANCIAL SERVICES -- 10.0%
2,800 Associates First Capital Corp.** .... 143,500
2,000 Beneficial Corp. .................... 128,000
2,500 Charles Schwab Corp. ................ 91,562
2,000 CMAC Investment Corp. ............... 76,000
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
FINANCIAL SERVICES (CONTINUED)
2,500 FannieMae ........................... $ 102,813
3,200 PMI Group Inc. (The)** .............. 163,600
1,100 Student Loan Marketing Association .. 130,075
----------
835,550
----------
INSURANCE - LIFE/HEALTH -- 3.7%
3,000 AmerUs Life Holdings, Inc.,
Class A* .......................... 69,000
1,000 Jefferson-Pilot Corp. ............... 57,750
2,700 SunAmerica, Inc. .................... 124,200
1,000 Torchmark Corp. ..................... 62,125
----------
313,075
----------
REAL ESTATE INVESTMENT TRUST -- 1.0%
5,500 CRIIMI MAE, Inc. .................... 85,938
----------
SAVINGS & LOANS - SAVINGS BANKS -- 30.6%
6,500 Astoria Financial Corp. ............. 254,313
4,500 Charter One Financial, Inc. ......... 200,250
700 Coast Savings Financial, Inc.* ...... 28,175
1,100 Collective Bancorp, Inc. ............ 44,963
3,200 Commercial Federal Corp. ............ 107,200
4,600 Dime Bancorp, Inc.* ................. 74,175
5,000 Dime Community Bancorp, Inc.* ....... 88,438
4,100 Downey Financial Corp. .............. 79,438
2,500 First Financial Corp.** ............. 65,938
8,200 FirstFed Financial Corp.* ........... 191,675
5,500 GA Financial, Inc. .................. 86,625
3,600 Glendale Federal Bank FSB* .......... 89,550
2,700 Golden West Financial Corp. ......... 175,500
1,800 Great Western Financial Corp. ....... 75,600
3,500 Greenpoint Financial Corp. .......... 193,813
6,400 Ocean Financial Corp. ............... 189,200
2,700 Peoples Heritage Financial Group,
Inc. .............................. 84,713
5,000 PFF Bancorp, Inc.* .................. 71,250
5,300 Roslyn Bancorp, Inc.* ............... 86,125
2,400 TCF Financial Corp. ................. 98,100
5,200 Washington Federal, Inc.** .......... 124,800
3,200 Washington Mutual, Inc. ............. 158,000
----------
2,567,841
----------
Total Common Stocks
(Cost $7,578,436) ................. 7,529,975
----------
The accompanying notes are an integral part of the financial statements.
2
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FBR FINANCIAL SERVICES FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT -- 9.1%
REPURCHASE AGREEMENT -- 9.1%
765,678 Bear, Stearns & Co. Inc.
(Agreement dated 04/30/97
to be repurchased at $765,790,
collateralized by $1,745,000
Resolution Trust Corp., CMO,
6.259%, due 02/25/20. Value
of collateral at maturity
is $783,365.) 5.27%, 05/01/97
(Cost $765,678) ................ $ 765,678
----------
Total Investments -- 98.7%
(Cost $8,344,114) .............. 8,295,653
Other Assets in Excess
of Liabilities -- 1.3% ......... 109,354
----------
Net Assets -- 100.0% ............. $8,405,007
==========
- ------------
* Non-income producing.
** Security or a portion thereof is out on loan.
CMO -- Collateralized Mortgage Obligation.
The accompanying notes are an integral part of the financial statements.
3
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FBR FAMILY OF FUNDS
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FBR SMALL CAP FINANCIAL FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 87.0%
BANKS - COMMERCIAL -- 2.4%
3,900 Commercial Bank of New York ......... $ 61,425
5,500 First Savings Bancorp, Inc. ......... 108,625
----------
170,050
----------
INSURANCE - PROPERTY & CASUALTY -- 0.6%
3,000 Old Guard Group, Inc.* .............. 41,625
----------
SAVINGS & LOANS - SAVINGS BANKS -
CENTRAL -- 17.8%
6,700 Cameron Financial Corp. ............. 110,550
2,300 Delphos Citizens Bancorp, Inc.* ..... 29,900
4,300 Enterprise Federal Bancorp, Inc. .... 68,800
8,700 Fidelity Financial of Ohio, Inc. .... 115,275
5,000 First Defiance Financial Corp. ...... 63,750
500 Flagstar Bancorp, Inc.* ............. 6,562
2,500 Great American Bancorp, Inc. ........ 40,312
4,600 Hemlock Federal Financial Corp.*/** . 59,225
1,500 HMN Financial, Inc.* ................ 28,875
3,300 Home Bancorp of Elgin, Inc. ......... 49,500
3,800 Landmark Bancshares, Inc. ........... 74,575
2,100 Lexington B & L Financial Corp.* .... 30,187
4,200 Marion Capital Holdings ............. 92,137
6,900 North Central Bancshares, Inc. ...... 108,244
7,800 Park Bancorp, Inc.* ................. 113,587
2,500 QCF Bancorp, Inc.* .................. 49,375
4,500 Western Ohio Financial Corp. ........ 99,000
9,000 Westwood Homestead Financial
Corp. ............................. 114,750
----------
1,254,604
----------
SAVINGS & LOANS - SAVINGS BANKS -
EAST -- 43.6%
3,300 Abington Bancorp, Inc. .............. 70,950
4,700 Affiliated Community Bancorp, Inc. .. 117,500
4,800 Ambanc Holding Company, Inc.* ....... 65,400
2,000 Andover Bancorp, Inc. ............... 54,500
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
SAVINGS & LOANS - SAVINGS BANKS -
EAST (CONTINUED)
1,400 Bankers Corp. ....................... $ 34,825
4,000 BostonFed Bancorp, Inc. ............. 61,000
6,600 Catskill Financial Corp. ............ 94,875
2,000 Commonwealth Bancorp, Inc. .......... 28,750
2,000 Continental Bank of Garden City* .... 53,000
1,700 Dime Community Bancorp, Inc.* ....... 30,069
6,400 Dime Financial Corp. ................ 120,800
3,900 First Bell Bancorp, Inc. ............ 57,037
3,700 First Bergen Bancorp ................ 50,412
4,100 First Federal Savings & Loan
Association of East Hartford ...... 94,300
3,000 First Shenango Bancorp, Inc.** ...... 73,125
8,000 FIRSTFED AMERICA BANCORP,
Inc.* ............................. 112,000
6,000 GA Financial, Inc. .................. 94,500
2,100 Harris Savings Bank ................. 43,050
3,300 Haven Bancorp, Inc. ................. 105,187
1,500 MASSBANK Corp. ...................... 60,094
2,000 Medford Savings Bank ................ 51,750
4,700 ML Bancorp, Inc. .................... 76,375
5,200 Ocean Financial Corp. ............... 153,725
8,300 Peekskill Financial Corp. ........... 112,050
5,900 PennFed Financial Services, Inc. .... 140,125
2,400 People's Bank** ..................... 72,000
2,500 Pittsburgh Home Financial Corp. ..... 36,875
5,000 Progress Financial Corp. ............ 42,813
2,600 Progressive Bank, Inc. .............. 62,400
4,200 Reliance Bancorp, Inc. .............. 95,025
5,400 Roslyn Bancorp, Inc.*/** ............ 87,750
3,200 SIS Bancorp, Inc. ................... 83,200
4,400 Statewide Financial Corp. ........... 68,475
4,600 TF Financial Corp. .................. 78,775
4,600 TR Financial Corp. .................. 170,775
2,000 Trenton Savings Bank FSB** .......... 38,000
3,000 Warren Bancorp, Inc. ................ 46,500
6,300 Wayne Bancorp, Inc. ................. 104,738
2,200 Webster Financial Corp. ............. 81,537
4,700 WSFS Financial Corp.* ............... 56,694
----------
3,080,956
----------
The accompanying notes are an integral part of the financial statements.
4
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FBR SMALL CAP FINANCIAL FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
SAVINGS & LOANS - SAVINGS BANKS -
SOUTH -- 9.6%
5,300 Acadiana BancShares, Inc. ........... $ 95,400
1,500 Community Savings, F.A. ............. 32,063
5,400 Fed One Bancorp, Inc. ............... 99,900
3,900 First Federal Bancshares of
Arkansas, Inc. .................... 70,200
3,700 GS Financial Corp.* ................. 52,031
5,800 Harrodsburg First Financial Bancorp . 89,900
1,000 ISB Financial Corp. ................. 22,500
2,000 Life Bancorp, Inc. .................. 37,250
4,500 Little Falls Bancorp, Inc. .......... 59,063
6,800 Texarkana First Financial Corp. ..... 117,300
----------
675,607
----------
SAVINGS & LOANS - SAVINGS BANKS -
WEST -- 13.0%
1,500 Bay View Capital Corp. .............. 72,844
2,400 Crazy Woman Creek Bancorp, Inc. ..... 31,800
5,100 First Colorado Bancorp, Inc.** ...... 81,600
4,000 First Savings Bank of Washington
Bancorp, Inc. ..................... 84,000
7,100 FirstFed Financial Corp.* ........... 165,963
4,300 HF Bancorp, Inc.* ................... 60,738
7,700 ITLA Capital Corp.* ................. 110,688
5,000 Klamath First Bancorp ............... 88,750
3,300 Pacific Crest Capital, Inc.*/** ..... 42,075
5,000 PFF Bancorp, Inc.* .................. 71,250
2,000 Provident Financial Holdings, Inc.* . 30,500
4,300 Quaker City Bancorp, Inc.* .......... 77,400
----------
917,608
----------
Total Common Stocks
(Cost $6,136,695) ................. 6,140,450
----------
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT -- 14.0%
REPURCHASE AGREEMENT -- 14.0%
984,906 Bear, Stearns & Co. Inc.
(Agreement dated 04/30/97
to be repurchased at $985,051,
collateralized by $2,245,000
Resolution Trust Corp., CMO,
6.259%, due 02/25/20.
Value of collateral at
maturity is $1,007,825.)
5.27%, 05/01/97
(Cost $984,906) .................. $ 984,906
----------
Total Investments -- 101.0%
(Cost $7,121,601) ................ 7,125,356
Liabilities in Excess
of Other Assets -- (1.0)% ........ (70,845)
----------
Net Assets -- 100.0% .............. $7,054,511
==========
- -------------
* Non-income producing.
** Security or a portion thereof is out on loan.
CMO -- Collateralized Mortgage Obligation.
The accompanying notes are an integral part of the financial statements.
5
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FBR SMALL CAP GROWTH/VALUE FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 87.7%
BUSINESS SERVICES -- 18.0%
5,000 American List Corp. ................. $ 115,625
1,200 Barra, Inc.* ........................ 31,200
200 Catalina Marketing Corp.* ........... 6,300
2,000 Duff & Phelps Credit Rating Co. ..... 52,250
1,300 Fair Isaac & Co., Inc. .............. 41,112
6,000 Warrantech Corp.* ................... 59,250
----------
305,737
----------
BUSINESS SERVICES - TECHNOLOGY -- 0.2%
400 Credit Management Solutions, Inc.* .. 3,600
----------
COMMUNICATIONS -- 1.8%
1,400 Vertex Communications Corp.* ........ 29,575
----------
FINANCE - SPECIALTY -- 13.8%
3,500 CRIIMI MAE, Inc. .................... 54,687
2,600 First Alliance Corp.* ............... 53,300
3,000 Investment Technology Group, Inc.* .. 57,000
1,000 Jefferies Group, Inc.** ............. 46,375
100 Resource America, Inc., Class A ..... 1,950
1,500 Ugly Duckling Corp.*/** ............. 21,188
----------
234,500
----------
GAMING -- 10.2%
1,000 Colonial Downs Holdings, Inc.,
Class A* .......................... 7,125
12,000 Penn National Gaming, Inc.* ......... 165,000
----------
172,125
----------
HEALTH SERVICES -- 1.0%
1,000 Lifeline Systems, Inc.* ............. 16,375
----------
HOLDING COMPANIES -- 1.1%
1,200 PCA International, Inc. ............. 19,200
----------
INSURANCE - LIFE -- 3.3%
1,450 Life Re Corp. ....................... 56,006
----------
INSURANCE - PROPERTY & CASUALTY -- 8.3%
900 Markel Corp.* ....................... 99,000
10,000 PICO Holdings, Inc.*/** ............. 42,500
----------
141,500
----------
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
MANUFACTURING - SPECIALTY -- 8.2%
1,000 Action Performance Companies, Inc.* . $ 26,375
500 Blount International, Inc., Class A . 20,250
100 Dionex Corp.* ....................... 4,887
400 General Instrument Corp.* ........... 9,350
3,000 General Scanning, Inc.* ............. 34,500
200 Kaydon Corp. ........................ 8,850
3,000 TransAct Technologies, Inc.* ........ 34,875
----------
139,087
----------
MOTOR SPORTS -- 10.7%
3,100 Dover Downs Entertainment, Inc. ..... 50,763
6,000 Grand Prix Association of Long
Beach, Inc.* ...................... 67,500
2,900 International Speedway Corp.,
Class B ........................... 53,650
200 Penske Motorsports, Inc.*/** ........ 5,875
200 Speedway Motorsports, Inc.*/** ...... 4,175
----------
181,963
----------
MOVIES & ENTERTAINMENT -- 6.2%
2,000 Carmike Cinemas, Inc., Class A*/** .. 62,000
2,000 Gaylord Entertainment Co., Inc.,
Class A ........................... 42,250
----------
104,250
----------
POWER PRODUCERS -- 2.7%
700 AES Corp.* .......................... 45,675
----------
TRANSPORT -- 2.2%
1,100 Air Express International Corp. ..... 37,675
----------
Total Common Stocks
(Cost $1,526,774) ................. 1,487,268
----------
NUMBER OF
CONTRACTS
- -----------
CALL OPTIONS -- 6.4%
BANKS - REGIONAL -- 6.4%
50 Bank of New York Co., Inc.,
Expiring 10/17/97 @ $35.00* .... 28,750
50 Bank of New York Co., Inc.,
Expiring 10/17/97 @ $40.00* .... 12,813
The accompanying notes are an integral part of the financial statements.
6
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FBR FAMILY OF FUNDS
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FBR SMALL CAP GROWTH/VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
NUMBER OF MARKET
CONTRACTS VALUE
- --------------------------------------------------------------------------------
BANKS - REGIONAL (CONTINUED)
20 Fleet Financial Group, Inc.,
Expiring 10/17/97 @ $ 60.00* ... $ 10,625
20 NationsBank Corp.,
Expiring 01/16/98 @ $ 57.50* ... 15,750
20 Wells Fargo & Co.,
Expiring 01/15/99 @ $ 320.00* .. 41,000
----------
Total Call Options
(Cost $104,293) ................ 108,938
----------
SHARES
- --------
WARRANTS -- 0.6%
BANKS - REGIONAL -- 0.6%
100 Bank of New York Co., Inc.,
Expiring 11/29/98 @ $ 15.50*
(Cost $7,495) .................. 9,550
----------
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT -- 6.7%
REPURCHASE AGREEMENT -- 6.7%
114,629 Bear, Stearns & Co. Inc.
(Agreement dated 04/30/97
to be repurchased at $114,646,
collateralized by $265,000
Resolution Trust Corp., CMO,
6.259%, due 02/25/20. Value
of collateral at maturity is
$118,964.) 5.27%, 05/01/97
(Cost $114,629) ................... $ 114,629
----------
Total Investments -- 101.4%
(Cost $1,753,191) ................. 1,720,385
Liabilities in Excess
of Other Assets -- (1.4)% ......... (23,885)
----------
Net Assets -- 100.0% ............... $1,696,500
==========
- ----------
* Non-income producing.
** Security or a portion thereof is out on loan.
CMO -- Collateralized Mortgage Obligation.
The accompanying notes are an integral part of the financial statements.
7
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STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
FBR FBR FBR
FINANCIAL SMALL CAP SMALL CAP
SERVICES FUND FINANCIAL FUND GROWTH/VALUE FUND
------------- -------------- -----------------
<S> <C> <C> <C>
ASSETS
Investments, at value (cost -- $8,344,114, $7,121,601,
$1,753,191, respectively) ................................. $8,295,653 $7,125,356 $1,720,385
Receivable for Fund shares sold ............................ 119,736 72,713 18,500
Receivable for investments sold ............................ -- 48,205 --
Receivable from investment adviser ......................... 17,151 21,217 27,116
Dividends and interest receivable .......................... 11,436 7,619 441
Prepaid organization costs and other assets ................ 71,631 71,630 71,630
---------- ---------- ----------
Total assets ............................................. 8,515,607 7,346,740 1,838,072
---------- ---------- ----------
LIABILITIES
Payable for investments purchased .......................... -- 179,706 33,675
Distribution fee payable ................................... 2,274 1,602 512
Accrued expenses and other liabilities ..................... 34,887 37,482 34,437
Organization expenses payable .............................. 73,439 73,439 72,948
---------- ---------- ----------
Total liabilities ........................................ 110,600 292,229 141,572
---------- ---------- ----------
NET ASSETS
Capital stock (unlimited number of shares authorized,
with no par value) ........................................ 8,539,569 7,037,038 1,754,783
Undistributed net investment income/(loss) ................. 14,251 9,671 (508)
Accumulated net realized gain/(loss) from investments ...... (100,352) 4,047 (24,969)
Net unrealized appreciation/(depreciation) on
investments and options transactions ...................... (48,461) 3,755 (32,806)
---------- ---------- ----------
Net assets applicable to shares outstanding .............. $8,405,007 $7,054,511 $1,696,500
========== ========== ==========
Net assets ................................................. $8,405,007 $7,054,511 $1,696,500
---------- ---------- ----------
Shares outstanding ......................................... 662,660 553,556 145,061
---------- ---------- ----------
Net asset value, offering and redemption price per share ... $12.68 $12.74 $11.70
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
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STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 3, 1997* THROUGH APRIL 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
FBR FBR FBR
FINANCIAL SMALL CAP SMALL CAP
SERVICES FUND FINANCIAL FUND GROWTH/VALUE FUND
------------- -------------- -----------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends ................................................. $ 29,436 $ 20,836 $ 2,091
Interest .................................................. 7,187 7,030 2,739
--------- -------- --------
36,623 27,866 4,830
--------- -------- --------
EXPENSES
Audit and legal fees ...................................... 8,971 8,971 8,971
Federal and state registration fees ....................... 8,752 9,335 8,435
Advisory fees ............................................. 12,203 9,924 2,912
Printing .................................................. 6,329 6,329 6,329
Trustees' fees and expenses ............................... 5,050 5,050 5,050
Amortization of organization expenses ..................... 4,832 4,832 4,832
Custodian fees and expenses ............................... 5,043 5,874 1,978
Administration and accounting fees ........................ 3,286 3,095 2,511
Transfer agent fees and expenses .......................... 2,722 2,722 2,722
Distribution fees ......................................... 3,390 2,757 809
Other ..................................................... 3,589 3,589 3,589
--------- -------- --------
Total expenses before waivers and reimbursements ........ 64,167 62,478 48,138
Less: waivers and reimbursements ........................ (41,795) (44,283) (42,800)
--------- -------- --------
Total expenses after waivers and reimbursements ......... 22,372 18,195 5,338
--------- -------- --------
Net investment income/(loss) .............................. 14,251 9,671 (508)
--------- -------- --------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND
OPTIONS TRANSACTIONS
Net realized gain/(loss) from investments ................. (100,352) 4,047 (24,969)
Net change in unrealized appreciation/(depreciation) on:
Investments ............................................. (48,461) 3,755 (37,451)
Options transactions .................................... -- -- 4,645
--------- -------- --------
Net realized and unrealized gain/(loss) on investments
and options transactions ................................. (148,813) 7,802 (57,775)
--------- -------- --------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS ................................................ $(134,562) $ 17,473 $(58,283)
========= ======== ========
<FN>
- ------------
* Commencement of investment operations.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
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- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD JANUARY 3, 1997* THROUGH APRIL 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
FBR FBR FBR
FINANCIAL SMALL CAP SMALL CAP
SERVICES FUND FINANCIAL FUND GROWTH/VALUE FUND
------------- -------------- -----------------
<S> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income/(loss) ............................... $ 14,251 $ 9,671 $ (508)
Net realized gain/(loss) from investments .................. (100,352) 4,047 (24,969)
Net change in unrealized appreciation/(depreciation)
on investments and options transactions .................. (48,461) 3,755 (32,806)
---------- ---------- ----------
Net increase/(decrease) in net assets resulting
from operations .......................................... (134,562) 17,473 (58,283)
---------- ---------- ----------
Increase in net assets derived from capital
share transactions .......................................... 8,506,236 7,003,705 1,721,449
---------- ---------- ----------
Total increase in net assets ............................. 8,371,674 7,021,178 1,663,166
NET ASSETS
Beginning of period ........................................ 33,333 33,333 33,334
---------- ---------- ----------
End of period (includes undistributed net investment
income of $14,251, $9,671 and $0, respectively) .......... $8,405,007 $7,054,511 $1,696,500
========== ========== ==========
<FN>
- -----------
* Commencement of investment operations.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
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THE
FBR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR THE PERIOD JANUARY 3, 1997* THROUGH APRIL 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for each share
outstanding, total investment return, ratios to average net assets and other
supplemental data for the period. This information has been derived from
information provided in the financial statements.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FBR FBR FBR
FINANCIAL SMALL CAP SMALL CAP
SERVICES FUND FINANCIAL FUND GROWTH/VALUE FUND
------------- -------------- -----------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE**
Net asset value, beginning of period ......................... $12.00 $12.00 $12.00
------ ------ ------
Net investment income/(loss)(1) .............................. 0.02 0.02 0.00
Net realized and unrealized gain/(loss) on investments
and options transactions(2) ................................ 0.66 0.72 (0.30)
------ ------ ------
Net increase/(decrease) in net assets resulting
from operations ............................................ 0.68 0.74 (0.30)
------ ------ ------
Net asset value, end of period ............................... $12.68 $12.74 $11.70
====== ====== ======
Total investment return(3) ................................... 5.67% 6.17% (2.50)%
====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) .................... $8,405 $7,055 $1,697
Ratio of expenses to average net assets***(1) ................ 1.65% 1.65% 1.65%
Ratio of net investment income/(loss)
to average net assets***(1) ................................ 1.05% 0.88% (0.16)%
Decrease reflected in above expense ratios and net investment
income/(loss) ratios due to waivers and reimbursements*** .. 3.08% 4.02% 13.22%
Portfolio turnover rate**** .................................. 34.45% 22.52% 14.09%
Average commission rate per share(4) ......................... $0.0599 $0.0601 $0.0726
<FN>
- ----------
* Commencement of investment operations.
** Calculated based on shares outstanding on the first and last day of the
period, except for dividends and distributions, if any, which are based on
actual shares outstanding on the dates of distributions.
*** Annualized.
**** Not annualized.
(1) Reflects waivers and reimbursements.
(2) The amount shown for a share outstanding throughout the period is not in
accord with the changes in the aggregate gains and losses in investments
during the period because of the timing of sales and repurchases of Fund
shares in relation to fluctuating net asset value during the period.
(3) Total investment return is calculated assuming a purchase of shares on the
first day and a sale of shares on the last day of each period reported and
includes reinvestments of dividends and distributions, if any. Total
investment return is not annualized.
(4) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period subject to such
commissions.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
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THE
FBR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
FBR FINANCIAL SERVICES FUND
FBR SMALL CAP FINANCIAL FUND
FBR SMALL CAP GROWTH/VALUE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The FBR Family of Funds (the "Trust") is an open-end management investment
company organized under the laws of the State of Delaware on April 30, 1996. The
Trust currently consists of four series which represent interests in one of the
following investment portfolios: FBR Financial Services Fund ("Financial
Services Fund"), FBR Small Cap Financial Fund ("Small Cap Financial Fund"), FBR
Small Cap Growth/Value Fund ("Growth/Value Fund") (collectively, the "Funds")
and FBR Information Technologies Fund. Financial Services Fund and Small Cap
Financial Fund are diversified portfolios and Growth/Value Fund and FBR
Information Technologies Fund are non-diversified portfolios. Each Fund has an
unlimited number of shares authorized with no par value. Financial Services
Fund, Small Cap Financial Fund and Growth/Value Fund commenced investment
operations on January 3, 1997. Currently, shares of the FBR Information
Technologies Fund are not being offered.
ORGANIZATIONAL MATTERS -- Prior to commencing investment operations on January
3, 1997, the Funds did not have any transactions other than those relating to
organizational matters and the sale of 2,777, 2,778, 2,778 shares of beneficial
interest of Financial Services Fund, Small Cap Financial Fund and Growth/Value
Fund, respectively, to Friedman, Billings, Ramsey & Co., Inc. ("FBR" or the
"Distributor") on December 16, 1996. Costs of approximately $75,334, $75,334,
$75,333 which were incurred by Financial Services Fund, Small Cap Financial Fund
and Growth/Value Fund, respectively, in connection with the organization,
including fees and expenses incurred to register and qualify the Funds' shares
for distribution under Federal securities regulations, have been deferred and
are being amortized using the straight-line method over the period of benefit
not exceeding sixty months, beginning with the commencement of investment
operations of each Fund. In the event that the Distributor or any transferee of
the Distributor redeems any of its original shares in any of the Funds prior to
the end of the sixty month period, the proceeds of the redemption payable in
respect of such shares shall be reduced by the pro rata share (based on the
proportionate share of the original shares redeemed to the total number of
original shares outstanding at the time of the redemption) of the unamortized
deferred organization expenses as of the date of such redemption. In the event
that any of the Funds are liquidated prior to the end of the sixty month period,
the Distributor or the transferee of the Distributor shall bear the unamortized
deferred organization expenses.
MANAGEMENT ESTIMATES -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
certain estimates and assumptions that may affect the reported amounts and
disclosures in the financial statements. Actual results could differ from those
estimates.
PORTFOLIO VALUATION -- The net asset value of each Fund is determined as of 4:15
p.m., New York time, on each business day. Each Fund's securities are valued at
the last sale price on the securities exchange or national securities market on
which such securities primarily are traded. Securities not listed on an exchange
or national securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked prices,
except in the case of open short positions where the asked price is used for
valuation purposes.Bid price is used when no asked price is available.
Short-term investments are carried at amortized cost, which approximates value.
Any securities or other assets for which recent market quotations are not
readily
12
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- --------------------------------------------------------------------------------
FBR FINANCIAL SERVICES FUND
FBR SMALL CAP FINANCIAL FUND
FBR SMALL CAP GROWTH/VALUE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
available are valued at fair value as determined in good faith by the Funds'
Board of Trustees.Restricted securities, as well as securities or other assets
for which market quotations are not readily available, or are not valued by a
pricing service approved by theBoard of Trustees, are valued at fair value as
determined in good faith by the Board of Trustees. The Board of Trustees will
review the method of valuations on a current basis. Expenses and fees, including
the investment advisory fee and distribution fee, are accrued daily and taken
into account for the purpose of determining the net asset value of each Fund's
shares.
OPTIONS -- Each Fund may buy and sell call and put options to hedge against
changes in net asset value or to attempt to realize a greater current return.
The risk associated with purchasing an option is that a Fund pays a premium
whether or not the option is exercised. Additionally, a Fund bears the risk of
loss of premium and change in market value should the counterparty not perform
under the contract. Put and call options purchased are accounted for in the same
manner as portfolio securities. The cost of securities acquired through the
exercise of call options is increased by the premiums paid. The proceeds from
securities sold through the exercise of put options are decreased by the
premiums paid.
CALL OPTIONS
--------------------------
GROWTH/VALUE FUND CONTRACTS PREMIUMS
----------------- --------- --------
Outstanding, at beginning of period ........... -- --
Options purchased ............................. 160 $104,293
------ --------
Outstanding, at end of period ................. 160 $104,293
====== ========
REPURCHASE AGREEMENTS -- Under the terms of a repurchase agreement, each Fund
has acquired securities from financial institutions or registered
broker-dealers, subject to the seller's agreement to repurchase such securities
at a mutually agreed upon date and price. The seller is required to maintain the
value of collateral held pursuant to the agreement at not less than the
repurchase price (including accrued interest). If the seller were to default on
its repurchase obligation or become insolvent, each Fund would suffer a loss to
the extent that the proceeds from a sale of the underlying portfolio securities
were less than the repurchase price, or to the extent that the disposition of
such securities by theFund was delayed pending court action.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME -- Transactions are accounted for
on the trade date. The cost of investments sold is determined by use of the
specific identification method for both financial reporting and income tax
purposes in determining realized gains and losses on investments. Interest
income is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. Expenses not directly attributable to a specific Fund are
allocated based on relative net assets of each Fund.
DIVIDENDS AND DISTRIBUTIONS -- Dividends from net investment income, if any,
will be declared and paid at least annually to shareholders. Distributions from
net realized capital gains, if any, will be distributed at least annually.
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income and capital gain distributions are determined in accordance with
U.S. federal income tax regulations which may differ from generally accepted
accounting principles.
13
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THE
FBR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
FBR FINANCIAL SERVICES FUND
FBR SMALL CAP FINANCIAL FUND
FBR SMALL CAP GROWTH/VALUE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
U.S. FEDERAL TAX STATUS -- No provision is made for U.S. federal income taxes as
it is each Fund's intention to qualify for and elect the tax treatment
applicable to regulated investment companies under Subchapter M of the Internal
Revenue Code of 1986, as amended, and make the requisite distributions to its
shareholders which will be sufficient to relieve it from U.S. federal income and
excise taxes.
2. TRANSACTIONS WITH AFFILIATES AND OTHER PARTIES
FBR Fund Advisers, Inc. (the "Adviser") serves as each Fund's investment
adviser. For its advisory services, the Adviser is entitled to receive from the
Funds a monthly fee equal to an annual rate of 0.90% of each Fund's average
daily net assets, computed daily and paid monthly.
The Adviser has voluntarily undertaken to limit each Fund's total operating
expenses (exclusive of brokerage commissions, taxes, interest and extraordinary
items) to the extent that such expenses exceeded 1.65% of each Fund's average
daily net assets. As necessary, this limitation is effected by waivers by the
Adviser of its advisory fees and reimbursements of expenses exceeding the
advisory fee. For the period ended April 30, 1997, investment advisory fees,
waivers and reimbursements of expenses were as follows:
GROSS ADVISORY
ADVISORY FEE EXPENSE
FUND FEES WAIVERS REIMBURSEMENTS
---- -------- --------- --------------
Financial Services Fund ........... $12,203 $(12,203) $29,592
Small Cap Financial Fund .......... 9,924 (9,924) 34,359
Growth/Value Fund ................. 2,912 (2,912) 39,888
The Funds will not pay the Adviser at a later time for any amounts it may waive
nor will the Funds reimburse the Adviser for any amounts it may assume.
The Trust, on behalf of each of the Funds, has entered into a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. Under the Plan in effect for the period January 3, 1997 (commencement
of investment operations) through April 30, 1997, Financial Services Fund, Small
Cap Financial Fund and Growth/Value Fund each paid the Distributor a fee at an
annual rate of 0.25% for each Fund. Such fees are based on the average daily net
assets in each Fund and are accrued daily and paid monthly. For the period
January 3, 1997 (commencement of investment operations) through April 30, 1997,
the fees paid to the Distributor under the Plan are payable without regard to
actual expenses incurred. The Distributor earned $3,390, $2,757 and $809 for
Financial Services Fund, Small Cap Financial Fund and Growth/Value Fund,
respectively, in distribution fees. The Distributor uses these fees to pay its
dealers whose clients hold Fund shares and for other distribution-related
activities.
14
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FBR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
FBR FINANCIAL SERVICES FUND
FBR SMALL CAP FINANCIAL FUND
FBR SMALL CAP GROWTH/VALUE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Bear Stearns Funds Management Inc. ("BSFM"), a wholly-owned subsidiary of The
Bear Stearns Companies Inc., serves as administrator for each of the Funds. For
providing administrative services BSFM is entitled to receive a monthly fee from
each Fund equal to an annual rate of 0.075% of the first $250 million of each
Fund's average daily net assets and 0.050% of each Fund's average daily net
assets in excess of $250 million, subject to a minimum annual fee of $75,000.
For the period ended April 30, 1997, BSFM has waived its minimum annual fee
requirement. The Funds will not pay BSFM at a later time for any amounts it may
waive.
PFPC Inc. ("PFPC"), provides certain administration and accounting services to
the Funds. For providing these services, PFPC is entitled to receive a monthly
fee equal to an annual rate of 0.075% of the first $1 billion of each Fund's
average daily net assets, and 0.050% of each Fund's average daily net assets
over $1 billion, subject to a minimum annual fee of $75,000. For the period
ended April 30, 1997, PFPC, at its discretion, voluntarily agreed to waive a
portion of its fees for each of the Funds. PFPC also acts as the Funds' transfer
agent, dividend disbursing agent and registrar.
3. INVESTMENT IN SECURITIES AND OPTIONS
For U.S. federal income tax purposes, the costs of investment in securities and
options owned at April 30, 1997, were $8,359,112, $7,121,854 and $1,754,396 for
Financial Services Fund, Small Cap Financial Fund and Growth/Value Fund,
respectively. Accordingly, the net unrealized appreciation/(depreciation) on
investments and options transactions were as follows:
NET APPRECIATION/
FUND APPRECIATION DEPRECIATION (DEPRECIATION)
---- ------------ ------------ -----------------
Financial Services Fund ...... $122,705 $(186,164) $(63,459)
Small Cap Financial Fund ..... 125,372 (121,870) 3,502
Growth/Value Fund ............ 62,997 (97,008) (34,011)
For the period ended April 30, 1997, aggregate purchases and sales of investment
in securities and options transactions (excluding short-term investments) were
as follows:
FUND PURCHASES SALES
---- ---------- ----------
Financial Services Fund ......... $9,282,458 $1,603,670
Small Cap Financial Fund ........ 7,007,627 874,978
Growth/Value Fund ............... 1,768,203 154,407
15
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THE
FBR FAMILY OF FUNDS
- --------------------------------------------------------------------------------
FBR FINANCIAL SERVICES FUND
FBR SMALL CAP FINANCIAL FUND
FBR SMALL CAP GROWTH/VALUE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS
As of April 30, 1997, each Fund has an unlimited number of shares authorized
with no par value.
Transactions in capital shares for the period January 3, 1997 (commencement of
investment operations) through April 30, 1997, were as follows:
SALES REPURCHASES
--------------------- -------------------
FUND SHARES AMOUNT SHARES AMOUNT
---- ------- ---------- ------ --------
Financial Services Fund ....... 724,279 $9,298,437 64,396 $795,440
Small Cap Financial Fund ...... 555,207 7,058,895 4,429 55,254
Growth/Value Fund ............. 147,464 1,783,389 5,181 62,572
There is a 1.00% redemption fee on shares redeemed which have been held 90 days
or less. During the period, these fees amounted to $3,239, $64 and $632 for
Financial Services Fund, Small Cap Financial Fund and Growth/Value Fund,
respectively. The redemption fees are collected and retained by each Fund for
the benefit of the remaining shareholders.
5. SECURITIES LENDING
Loans of securities are required at all times to be secured by collateral equal
to at least 100% of the securities value, in the form of cash or U.S. Government
or agency obligations, plus any interest due thereon, which collateral must be
marked to market daily by the Adviser. However, in the event of default or
bankruptcy by the other party to the agreement, realization and/or retention of
the collateral may be subject to legal proceedings. The market value of
securities on loan to brokers and the related collateral cash and
indemnification received at April 30, 1997, were as follows:
VALUE OF SECURITIES VALUE OF COLLATERAL
FUND ON LOAN AND INDEMNIFICATION
---- ------------------- -------------------
Financial Services Fund ........... $312,767 $321,451
Small Cap Financial Fund .......... 322,087 334,445
Growth/Value Fund ................. 182,112 197,525
The cash collateral was reinvested into a repurchase agreement which was in turn
collateralized by Resolution Trust Corp., Collateralized Mortgage Obligations.
Income from securities lending is included under the caption INTEREST in the
Statement of Operations.
16
<PAGE>
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<PAGE>
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<PAGE>
THE
FBR FAMILY OF FUNDS
Potomac Tower
1001 Nineteenth Street North
Arlington, VA 22209
1-888-888-0025
e-mail: [email protected]
Internet: http://www.fbrfunds.com
INVESTMENT ADVISER
FBR Fund Advisers, Inc.
Potomac Tower
1001 Nineteenth Street North
Arlington, VA 22209
DISTRIBUTOR
Friedman, Billings, Ramsey & Co., Inc.
Potomac Tower
1001 Nineteenth Street North
Arlington, VA 22209
ADMINISTRATOR
Bear Stearns Funds Management Inc.
245 Park Avenue
New York, NY 10167
ADMINISTRATION AND ACCOUNTING SERVICES/
TRANSFER AGENT
PFPC INC.
Bellevue Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809
CUSTODIAN
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP
8000 Towers Cresent Drive
Vienna, VA 22182
COUNSEL
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, DC 20005
The financial information included herein is taken from the records of each Fund
without examination by independent auditors who do not express an opinion
thereon.
This report is submitted for the general information of the shareholders of each
Fund. It is not authorized for the distribution to prospective investors in each
Fund unless it is preceded or accompanied by a current prospectus which includes
details regarding each Fund's objectives, policies and other information. Total
return is based on historical results and is not intended to indicate future
performance. The investment return and principal value of an investment in each
Fund will fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than original cost.
