FBR FAMILY OF FUNDS, N-30D, 2000-12-29

FBR FAMILY OF FUNDS
N-30D, 2000-12-29

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<PAGE>
FBR FAMILY OF FUNDS

-------------

FBR FINANCIAL SERVICES FUND
FBR SMALL CAP FINANCIAL FUND
FBR SMALL CAP VALUE FUND
FBR REALTY GROWTH FUND

[LOGO]

ANNUAL REPORT
OCTOBER 31, 2000

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
<PAGE>
FBR FAMILY OF FUNDS
----------------

FBR FINANCIAL SERVICES FUND
FBR SMALL CAP FINANCIAL FUND
FBR SMALL CAP VALUE FUND
FBR REALTY GROWTH FUND

LETTER TO SHAREHOLDERS

December 8, 2000

Dear Fellow Shareholder:

What a difference a year makes. A stock market correction began in March and
has filtered through the end of this reporting period. Investor exuberance for
"story" companies with growing losses and the potential for future earnings has
ebbed, while a wave of fundamentalism has swelled into the stock market. Now the
tide has turned on the large capitalization technology growth companies, which
had fueled one of the greatest bull markets in recent history, leaving the more
traditional businesses to thrive in its wake.

As a result, the FBR Family of Funds (the "Trust") ended our fiscal year,
October 31, 2000, with three of our four funds' performance having a positive
correlation with and/or outperforming their respective benchmarks. Detailed
performance data for each fund can be found in the "Financial Highlights" and
line graph sections of this report.(1)

Other highlights of the past year include the following. In June,
shareholders approved a new Sub-Advisory agreement between the Trust and Akre
Capital Management with respect to the Small Cap Value Fund. This allowed us to
retain the expertise of portfolio manager Chuck Akre while he continues to
expand his money management business. In September, the Trust entered into a new
service agreement with Rushmore Trust and Savings, FSB ("Rushmore") pursuant to
which Rushmore assumed the administrative, accounting and custody services
previously provided by Bear Stearns Fund Management Inc. and The Custodial Trust
Company respectively. In addition, pursuant to a new transfer agency agreement
dated November 1, 2000, Rushmore assumed transfer agent duties for the Trust
from PFPC, Inc. Finally, we anticipate the previously announced acquisition of
Money Management Associates LP ("MMA") and Rushmore to close in the first part
of 2001. We believe that this event will not only expand the diversity of our
fund offerings but also have a positive effect on our expense structure directly
benefiting our shareholders.

As always, we believe that the annual report is an effective vehicle for us
to convey to you the thoughts and philosophies of your money managers. In the
following sections, your portfolio managers will outline their views of the
market over the past year.

DAVID ELLISON, PORTFOLIO MANAGER -- FBR FINANCIAL SERVICES AND FBR SMALL CAP
FINANCIAL FUND(2)

For the year ended October 31, 2000, the total returns for Financial
Services Fund an Small Cap Financial Fund were 6.21% and 12.56%, respectively.
We are encouraged by the recent upswing in financial stocks and believe
profitable times are ahead for financial service investors. It appears that a
domestic economic slowdown is developing which will have an uneven impact on the
industry. I expect loan quality to decline as the economy slows. I expect
capital market revenue growth to decline as financing and underwriting
opportunities deteriorate. I expect lending

2
<PAGE>
spreads to increase modestly as short-term interest rates fall. I expect
competitive conditions in the lending market to abate as companies pull back
from aggressive growth plans. This is no time to be discouraged. Challenging
times are good times for financial services investors.

In my seventeen years of investing in financial services, the best time to
make money is when the underlying fundamentals go from bad to good, not good to
great or great to excellent. This is an industry that has well defined cycles
very much dictated by interest rates and credit conditions. The last couple of
years we have seen rising interest rates. The next couple years we will probably
see higher credit costs. Both funds are currently over weighted in companies
that will benefit from improving interest rate conditions. Both funds are
conversely under weighted in companies that will be negatively impacted by
higher credit costs. Over the next one to three years I expect both funds will
benefit from stable or lower short-term interest rates, and then later from
improved credit conditions.

In sum, it's all about fundamentals. Since mid 1998 industry fundamentals
have been stable to declining depending on what company you chose. This was not
a great time for investors because nothing was wrong and thus nothing was
getting better. Today, we have been through two years of rising short-term
interest rates and the beginnings of a credit cycle. There is now an opportunity
to get better on both the rate front and on the credit cycle as it reaches the
bottom.

CHUCK AKRE, PORTFOLIO MANAGER -- FBR SMALL CAP VALUE FUND(3)

Last year we said to you that our goal for the fund was to compound the
shareholder's capital at a rate we hope will be above the Russell 2000
benchmark. In the year 2000 we have outperformed the benchmark with the fund's
trailing one-year performance through October 31, 2000 up 17.41% vs. the Russell
2000 at 17.56%(4). Our year-to-date performance is about break even. And like
last year, the market has been very volatile. In fact we believe that the market
has been in a bear phase since April, selectively diminishing the valuations of
large groups of stocks.

Our style of holding concentrated positions means that our share price will
be volatile on a daily basis going forward just as it has been all year. But you
may be sure that our focus remains on finding and owning a small number of
outstanding businesses which we determine, based on thorough analysis, will
continue to earn high returns on shareholder capital. The result of this
strategy has been responsible for our achieving above benchmark performance for
the nearly four years of existence.

As in the past we offer no opinion on the direction of the market for small
cap stocks. We do affirm to you, our fellow shareholders, that we will continue
to be diligent in searching out a small number of outstanding businesses to own
in our portfolio in furtherance of our goal of compounding your capital at an
above average rate, while incurring a level of risk compatible with that goal.

SKIP AYLESWORTH, PORTFOLIO MANAGER -- FBR REALTY GROWTH FUND(5)

For the second time in its five-year history, I am disappointed to say that
we under performed against our real estate benchmark, the NAREIT Total Return
Index. For the fiscal year ended October 31, 2000, your fund returned -1.41% as
compared to the NAREIT benchmark of 17.33%(6). This was a significant under
performance and the third straight year that the total return was negative. I'd
like to describe what has gone wrong and how we foresee the future.

As you are aware, we have followed a three-prong investment strategy.
Roughly a third of the fund is invested in high quality, blue chip large
capitalized real estate companies, a third in high quality real estate companies
whose stock price appears to be a good value and a third of the portfolio in
opportunistic real estate investments.

3
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Our blue chip portion of the portfolio had an annualized return of 29%. Our
value tier had an annualized return of 9% while our opportunistic portion had a
negative annualized return of -20%. This overall performance mirrored the
general real estate equities market, which rewarded investors in the higher
quality, blue chip issuers. These blue chip issuers also comprised the bulk of
the various market cap weighted indices.

Clearly our opportunistic investments have not performed as we wanted in the
short-term. While disappointing, it is explainable in that these investments
usually involve turnaround situations or small cap companies that each have
their own unique problems and time tables that create the opportunity. As much
as we would like to make a lot of money quickly in these situations, generally
it's the patient investor who is rewarded. In reviewing our current holdings in
this area we are seeing improving trends in earnings, insider stock purchases
and progress on current business plans. When the market will reward these firms,
and hence your fund, is the part that is hard to predict and is currently
frustrating.

At this time, our general outlook is that the economy is slowing which will
in turn slow earnings growth for the real estate industry. Interest rates should
remain flat or decline as the economy weakens. This is a positive for publicly
traded real estate securities. In this environment, we would anticipate that our
value and opportunistic portions of the fund should outperform the blue chips
over the next twelve months.

We continue to believe that the real estate sector offers investors the
opportunity for high income with moderate growth. These characteristics are
often considered defensive and should be used for asset diversification
purposes. Our Fund distinguishes itself from its peers by following a
three-pronged investment philosophy. As a fellow shareholder of the Realty
Growth Fund, I look forward to a better report card next year.

4
<PAGE>
IN CONCLUSION

We hope you find this report helpful in evaluating your investment in the
Trust. As always, we welcome the opportunity to discuss our Funds with you. As
we continually strive to improve all aspects of our business, feel free to
contact us with any questions or concerns that you may have. To receive a free
copy of the FBR Family of Funds prospectus please call our marketing
representatives at 1-888-888-0025. Please read the prospectus before you invest.
To discuss issues related to your particular account, contact our shareholder
services representatives at 1-800-821-3460.

[SIGNATURE]
David Ellison

Managing Director, Mutual

Fund Asset Management

----------------

(1)Total return represents past performance, which is no guarantee of future
results. Investment return and principal value will fluctuate so that investor's
shares, when redeemed, may be worth more or less than their original cost. FBR
Fund Advisers, Inc. waived a portion of its advisory fees and agreed to
contractually reimburse a portion of the operating expenses, as necessary, to
maintain existing expense limitations, as set forth in the notes to the
financial statements during this time period. Without waivers and related
reimbursements, total returns would have been lower.

(2)Fund investments are focused in the financial services industry, which
may be adversely affected by regulatory or other market conditions, such as
rising interest rates.

(3)The non-diversified nature of the Small Cap Value Fund may subject
investors to greater volatility than other diversified funds. Small
capitalization stocks as a group may not respond to market rallies or downturns
as much as other types of equity securities.

(4)The indices are unmanaged and unlike the FBR Family of Funds have no
management fees or operating cost that reduce reported returns. The volatility
and other risk characteristics for the fund will differ from the volatility and
risk characteristics of the indices.

(5)Investments in real estate companies and REITs may be adversely affected
by a decline in value of real estate assets, fluctuations in interest rates,
credit quality trends and cash flow on underlying assets. Certain REITs have
relatively small market capitalizations and, therefore, may not respond to
market rallies or downturns as much as other types of equity securities.

(6)The indices are unmanaged and unlike the FBR Family of Funds have no
management fees or operating cost that reduce reported returns. The volatility
and other risk characteristics for the fund will differ from the volatility and
risk characteristics of the indices.

5
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[FBR LOGO]
FBR FAMILY OF FUNDS
----------------

FBR FINANCIAL SERVICES FUND

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
FUND SHARES(1)(2) VS. VARIOUS INDICES
(UNAUDITED)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

DOLLARS

<TABLE>
<CAPTION>
LIPPER FINANCIAL
FBR FINANCIAL S&P 500 SERVICES
SERVICES FUND COMPOSITE INDEX FUND INDEX
<S> <C> <C> <C>
Jan. 3, 1997 $10,000 $10,000 $10,000
Apr. 30, 1997 $10,567 $10,936 $11,006
Oct. 31, 1997 $13,358 $12,593 $13,678
Apr. 30, 1998 $16,649 $15,425 $16,756
Oct. 31, 1998 $14,309 $15,362 $14,438
Apr. 30, 1999 $16,065 $18,791 $17,172
Oct. 31, 1999 $15,282 $19,304 $16,267
Apr. 30, 2000 $12,487 $20,692 $14,637
Oct. 31, 2000 $16,231 $20,480 $18,230
</TABLE>

Past performance is not predictive of future performance.

<TABLE>
TOTAL RETURNS
ONE YEAR ENDED AVERAGE
OCTOBER 31, 2000 ANNUAL(3)
----- -----
<S> <C> <C>
FBR Financial Services Fund(1)(2).... 6.21% 13.48%
S&P 500 Composite Index(1)........... 6.09 20.57
Lipper Financial Services Fund
Index(1)............................. 12.07 16.96
</TABLE>

(2) FBR Fund Advisers, Inc. waived a portion of its advisory fees and agreed to
contractually reimburse a portion of the Fund's operating expenses, as
necessary, to maintain existing expense limitations, as set forth in the
notes to the financial statements. Total returns shown include fee waivers
and expense reimbursements, if any; total returns would have been lower had
there been no waiver of fees and/or reimbursement of expenses in excess of
expense limitations.

(3) For the period January 3, 1997 (commencement of investment operations)
through October 31, 2000. Certain purchases made by shareholders within
this period would have been subject to an initial maximum sales charge of
up to 5.50%. As a result, total returns for such shareholders would have
been lower.

6
<PAGE>
[FBR LOGO]
FBR FAMILY OF FUNDS
----------------

FBR SMALL CAP FINANCIAL FUND

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
FUND SHARES(1)(2) VS. VARIOUS INDICES
(UNAUDITED)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

DOLLARS

<TABLE>
<CAPTION>
FBR SMALL CAP RUSSELL 2000 LIPPER FINANCIAL
FINANCIAL FUND INDEX SERVICES FUND INDEX
<S> <C> <C> <C>
Jan. 3, 1997 $10,000 $10,000 $10,000
Apr. 30, 1997 $10,617 $9,604 $11,006
Oct. 31, 1997 $14,608 $12,213 $13,678
Apr. 30, 1998 $17,081 $13,695 $16,756
Oct. 31, 1998 $13,150 $10,791 $14,438
Apr. 30, 1999 $13,662 $12,437 $17,172
Oct. 31, 1999 $13,701 $12,404 $16,267
Apr. 30, 2000 $12,246 $14,745 $14,637
Oct. 31, 2000 $15,421 $14,582 $18,230
</TABLE>

Past performance is not predictive of future performance.

<TABLE>
TOTAL RETURNS
ONE YEAR ENDED AVERAGE
OCTOBER 31, 2000 ANNUAL(3)
----- -----
<S> <C> <C>
FBR Small Cap Financial Fund(1)(2)... 12.56% 11.97%
Russell 2000 Index(1)................ 17.41 10.34
Lipper Financial Services Fund
Index(1)............................. 12.07 16.96
</TABLE>

------------------------

(1) The graph assumes a hypothetical $10,000 initial investment in the Fund and
reflects all Fund expenses. Investors should note that the Fund is a
professionally managed mutual fund while the indices are unmanaged, do not
incur sales charges or expenses and are not available for investment.

7
<PAGE>
[FBR LOGO]
FBR FAMILY OF FUNDS
----------------

FBR SMALL CAP VALUE FUND

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
FUND SHARES(1)(2) VS. VARIOUS INDICES
(UNAUDITED)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

DOLLARS

<TABLE>
<CAPTION>
LIPPER
FBR SMALL CAP RUSSELL SMALL CAP
VALUE FUND 2000 INDEX VALUE INDEX
<S> <C> <C> <C>
Jan. 3, 1997 $10,000 $10,000 $10,000
Apr. 30, 1997 $9,750 $9,604 $9,980
Oct. 31, 1997 $13,917 $12,213 $12,724
Apr. 30, 1998 $15,751 $13,695 $14,177
Oct. 31, 1998 $12,585 $10,791 $11,183
Apr. 30, 1999 $15,248 $12,437 $11,740
Oct. 31, 1999 $14,629 $12,404 $11,432
Apr. 30, 2000 $17,396 $14,745 $12,603
Oct. 31, 2000 $17,202 $14,582 $13,608
</TABLE>

Past performance is not predictive of future performance.

<TABLE>
TOTAL RETURNS
ONE YEAR ENDED AVERAGE
OCTOBER 31, 2000 ANNUAL(3)
----- -----
<S> <C> <C>
FBR Small Cap Value Fund(1)(2) 17.58% 15.21%
Russell 2000 Index(1)................ 17.41 10.34
Lipper Small Cap Value Index(1)...... 19.04 8.37
</TABLE>

------------------------

8
<PAGE>
[FBR LOGO]
FBR FAMILY OF FUNDS
----------------

FBR REALTY GROWTH FUND

COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
FUND SHARES(1)(2) VS. VARIOUS INDICES
(UNAUDITED)

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

DOLLARS

<TABLE>
<CAPTION>
FBR REALTY S&P 500 NAREIT TOTAL
GROWTH FUND COMPOSITE INDEX RETURN INDEX
<S> <C> <C> <C>
Jul. 3, 1995 $10,000 $10,000 $10,000
Oct. 31, 1995 $9,664 $10,709 $10,303
Apr. 30, 1996 $10,495 $12,178 $11,294
Oct. 31, 1996 $12,657 $13,277 $12,962
Apr. 30, 1997 $14,779 $15,226 $14,601
Oct. 31, 1997 $17,781 $17,529 $17,081
Apr. 30, 1998 $18,953 $21,471 $17,050
Oct. 31, 1998 $14,684 $21,383 $14,560
Apr. 30, 1999 $15,501 $26,156 $14,971
Oct. 31,1999 $14,131 $26,871 $13,336
Apr. 30, 2000 $14,496 $28,804 $14,654
Oct. 31,2000 $13,932 $28,508 $15,647
</TABLE>

Past performance is not predictive of future performance.

<TABLE>
TOTAL RETURNS
ONE YEAR
ENDED FIVE YEAR
OCTOBER 31, AVERAGE AVERAGE
2000 ANNUAL ANNUAL(3)
------ ----- -----
<S> <C> <C> <C>
FBR Realty Growth
Fund(1)(2)................ (1.41)% 7.59% 6.41%
S&P 500 Composite
Index(1).................. 6.09 21.63 21.69
NAREIT Total Return
Index(1).................. 17.33 8.72 8.75
</TABLE>

------------------------
(1) The graph assumes a hypothetical $10,000 initial investment in the Fund and
reflects all Fund expenses. Investors should note that the Fund is a
professionally managed mutual fund while the indices are unmanaged, do not
incur sales charges or expenses and are not available for investment.
(2) FBR Fund Advisers, Inc. waived its advisory fees and agreed to
contractually reimburse a portion of the Fund's operating expenses, as
necessary, to maintain existing expense limitations, as set forth in the
notes to the financial statements. Total returns shown include fee waivers
and expense reimbursements, if any; total returns would have been lower had
there been no waiver of fees and/or reimbursement of expenses in excess of
expense limitations. Commencing September 21, 1998, FBR Fund Advisers, Inc.
assumed the daily portfolio management responsibility for the Fund. For the
period July 3, 1995 through September 18, 1998, the Fund's investment
adviser was GrandView Advisers, Inc.
(3) For the period July 3, 1995 (commencement of investment operations) through
October 31, 2000. Purchases made by shareholders prior to December 21,
1998, would have been subject to an initial maximum sales charge of up to
5.50%. As a result, total returns for such shareholders would have been
lower.

9
<PAGE>
[FBR LOGO]
FBR FAMILY OF FUNDS
----------------

FBR FINANCIAL SERVICES FUND

PORTFOLIO OF INVESTMENTS

OCTOBER 31, 2000

<TABLE>
<CAPTION>
------------------------------------------------------------------------------
<C> <S> <C>
SHARES VALUE
<CAPTION>
------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 95.7%
BANKS COMMERCIAL -- 11.3%
46,000 Banknorth Group, Inc.................................. $ 833,750
5,000 Fifth Third Bancorp................................... 256,875
65,000 North Fork Bancorporation, Inc........................ 1,312,188
23,000 UnionBanCal Corp...................................... 483,000
-----------
2,885,813
-----------
BANKS - MONEY CENTER -- 9.1%
6,000 Bank of America Corp.................................. 288,375
14,000 Bank of New York Co., Inc............................. 805,875
3,000 Chase Manhattan Corp.................................. 136,500
21,000 Citigroup, Inc........................................ 1,105,125
-----------
2,335,875
-----------
BANKS - SUPER REGIONAL -- 24.2%
1,000 Bank One Corp......................................... 36,500
11,000 Comerica, Inc......................................... 663,437
33,000 First Union Corp...................................... 1,000,313
26,000 FleetBoston Financial Corp............................ 988,000
14,000 KeyCorp............................................... 345,625
12,000 Mellon Financial Corp................................. 579,000
15,000 PNC Financial Services Group.......................... 1,003,125
16,000 Sun Trust Banks, Inc.................................. 781,000
19,000 U.S. Bancorp.......................................... 459,562
7,000 Wells Fargo & Co...................................... 324,188
-----------
6,180,750
-----------
FINANCIAL SERVICES -- 10.6%
19,000 Fannie Mae............................................ 1,463,000
21,000 Freddie Mac........................................... 1,260,000
-----------
2,723,000
-----------
INSURANCE -- 5.3%
30,000 Fidelity National Financial, Inc...................... 736,875
3,000 Jefferson-Pilot Corp.................................. 206,250
1,000 John Hancock Financial Services, Inc.................. 31,625
</TABLE>

<TABLE>
SHARES VALUE
<C> <S> <C>
<CAPTION>
------------------------------------------------------------------------------
<C> <S> <C>
INSURANCE (CONTINUED)
5,000 PMI Group, Inc........................................ $ 369,375
-----------
1,344,125
-----------
SAVINGS & LOANS - SAVINGS
BANKS -- 35.2%
41,000 Astoria Financial Corp................................ 1,537,500
55,650 Charter One Financial, Inc............................ 1,276,472
36,000 Dime Bancorp., Inc.................................... 879,750
28,000 Golden State Bancorp, Inc............................. 731,500
29,000 Golden West Financial Corp............................ 1,625,812
58,000 Washington Federal, Inc............................... 1,294,125
38,000 Washington Mutual, Inc................................ 1,672,000
-----------
9,017,159
-----------
Total Common Stocks
(Cost $21,037,984).................................. 24,486,722
-----------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
----------
<C> <S> <C>
SHORT-TERM INVESTMENT -- 4.8%
REPURCHASE AGREEMENTS -- 4.8%
$1,237,000 PaineWebber Incorporated 6.3%, dated, 10/31/00, to be
repurchased on 11/1/00 at $1,237,216 (Collateral:
$1,229,627 U.S. Treasury Notes, 7.875%, due 8/15/01,
value $1,248,830)
(Cost $1,237,000)................................... 1,237,000
-----------
Total Investments -- 100.5%
(Cost $22,274,984).................................. 25,723,722
Liabilities in Excess of Other Assets -- (0.5)%....... (130,765)
-----------
Net Assets -- 100.0%.................................. $25,592,957
===========
</TABLE>

The accompanying notes are an integral part of the financial statements.

10
<PAGE>
[FBR LOGO]
FBR FAMILY OF FUNDS
----------------

FBR SMALL CAP FINANCIAL FUND

PORTFOLIO OF INVESTMENTS

OCTOBER 31, 2000

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
<C> <S> <C>
SHARES VALUE
<CAPTION>
-------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 90.8%
SAVINGS & LOANS - SAVINGS BANKS - CENTRAL -- 17.6%
39,500 CFS Bancorp, Inc..................................... $ 414,750
70,500 First Defiance Financial Corp........................ 757,875
124,500 First Place Financial Corp........................... 1,299,469
13,200 First SecurityFed Financial, Inc..................... 184,800
24,800 HMN Financial, Inc................................... 317,750
70,200 Jacksonville Bancorp, Inc............................ 1,009,125
53,400 Jefferson Savings.................................... 740,925
80,000 Local Financial Corp*................................ 850,000
48,900 Logansport Financial Corp............................ 550,125
119,300 Mutualfirst Financial, Inc........................... 1,543,444
37,600 North Central Bancshare.............................. 665,050
-----------
8,333,313
-----------
SAVINGS & LOANS - SAVINGS BANKS - EAST -- 41.1%
57,500 American Financial Holdings, Inc..................... 1,027,812
48,600 Bay State Bancorp, Inc............................... 1,202,850
119,000 Berkshire Hills Bancorp, Inc......................... 1,747,813
66,700 BostonFed Bancorp, Inc............................... 1,217,275
14,500 Camden National Corp................................. 204,812
81,500 Connecticut Bancshares, Inc.*........................ 1,477,188
7,000 Dime Community Bancorp, Inc.......................... 155,312
61,800 First Bell Bancorp, Inc.............................. 741,600
4,000 First Federal Savings & Loan Association of East
Hartford........................................... 122,000
81,600 First Keystone Financial, Inc........................ 831,300
65,500 FirstFed America Bancorp, Inc........................ 966,125
29,600 Flushing Financial Corp.............................. 451,400
3,000 GA Financial, Inc.................................... 42,000
96,400 Hingham Institution for Savings...................... 1,409,850
6,000 Independence Community Bank Corp..................... 88,125
129,000 Lawrence Savings Bank................................ 1,112,625
</TABLE>

<TABLE>
SHARES VALUE
<C> <S> <C>
<CAPTION>
-------------------------------------------------------------------------------
<C> <S> <C>
SAVINGS & LOANS - SAVINGS BANKS - EAST (CONTINUED)
23,600 Medford Bancorp, Inc................................. $ 324,500
47,900 Northeast Pennsylvania Financial Corp................ 514,925
22,700 Parkvale Financial Corp.............................. 425,625
104,500 PennFed Financial Services, Inc...................... 1,534,844
78,500 Port Financial Corp.................................. 1,295,250
127,710 Seacoast Financial Services Corp..................... 1,356,919
10,000 Thistle Group Holdings, Co........................... 78,750
46,264 Waypoint Financial*.................................. 445,291
58,500 Woronoco............................................. 680,062
-----------
19,454,253
-----------
SAVINGS & LOANS - SAVINGS BANKS - SOUTH -- 3.0%
56,000 Bank United Financial Corp.*......................... 434,000
9,700 First Federal Bancshares of Arkansas, Inc............ 174,600
107,600 Pocahontas Bancorp, Inc.............................. 793,550
-----------
1,402,150
-----------
SAVINGS & LOANS - SAVINGS BANKS - WEST -- 26.7%
8,000 Downey Financial Corp................................ 382,000
38,000 First Washington Bancorp, Inc........................ 508,250
105,800 FirstFed Financial Corp.*............................ 2,697,900
35,800 Hawthorne Financial Corp............................. 443,025
33,700 ITLA Capital Corp.................................... 490,756
74,300 Klamath First Bancorp, Inc........................... 882,313
55,800 Pacific Crest Capital, Inc,.......................... 704,475
130,000 Pacific Union Bank*.................................. 1,202,500
6,700 PFF Bancorp, Inc..................................... 123,950
21,900 Provident Financial Holdings, Inc.*.................. 407,887
99,200 Quaker City Bancorp, Inc.*........................... 1,878,600
45,100 Sterling Financial Corp.*............................ 558,113
58,500 Timberland Bancorp, Inc.............................. 687,375
</TABLE>

The accompanying notes are an integral part of the financial statements.

11
<PAGE>
[FBR LOGO]
FBR FAMILY OF FUNDS
----------------

FBR SMALL CAP FINANCIAL FUND

PORTFOLIO OF INVESTMENTS (CONTINUED)

OCTOBER 31, 2000

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
----------
<C> <S> <C>
SHORT-TERM INVESTMENT -- 4.8%
REPURCHASE AGREEMENT -- 4.8%
$2,262,000 PaineWebber Incorporated
6.3%, dated 10/31/00, to be repurchased on 11/1/00
at $2,262,396 (Collateral: $2,248,518 U.S. Treasury
Notes, 7.875%, due 8/15/01, value $2,283,632)
(Cost $2,262,000)................................... 2,262,000
-----------
Total Investments -- 95.6%
(Cost $44,490,005).................................. 45,224,254
Other Assets less Liabilities -- 4.4%................. 2,088,894
-----------
Net Assets -- 100.0%.................................. $47,313,148
===========
</TABLE>

------------------

* Non-income producing.

The accompanying notes are an integral part of the financial statements.

12
<PAGE>
[FBR LOGO]
FBR FAMILY OF FUNDS
----------------

FBR SMALL CAP VALUE FUND

PORTFOLIO OF INVESTMENTS

OCTOBER 31, 2000

<TABLE>
SHARES VALUE
<C> <S> <C>
<CAPTION>
------------------------------------------------------------------------------
<C> <S> <C>
MOTOR SPORTS (CONTINUED)
11,650 International Speedway Corp., Class A................. $ 374,256
19,000 International Speedway Corp., Class B................. 608,000
-----------
1,393,506
-----------
Total Common Stocks
(Cost $7,528,058)................................... 10,042,646
-----------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C>
SHORT-TERM INVESTMENT -- 2.6%
REPURCHASE AGREEMENT -- 2.6%
$272,000 PaineWebber Incorporated 6.3%, dated 10/31/00, to be
repurchased on 11/1/00 at $272,048 (Collateral:
$270,379 U.S. Treasury Notes, 7.875%, due 8/15/01,
value $274,601)
(Cost $272,000)..................................... 272,000
-----------
Total Investments -- 100.3%
(Cost $7,800,058)................................... 10,314,646
Liabilities in Excess of Other Assets -- (0.3)%....... (35,226)
-----------
Net Assets -- 100.0%.................................. $10,279,420
===========
</TABLE>

------------------

* Non-income producing.

The accompanying notes are an integral part of the financial statements.

13
<PAGE>
[FBR LOGO]
FBR FAMILY OF FUNDS
----------------

FBR REALTY GROWTH FUND

PORTFOLIO OF INVESTMENTS

OCTOBER 31, 2000

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
<C> <S> <C>
VALUE
SHARES
-------------------------------------------------------------------------------
COMMON STOCKS -- 94.4%
REAL ESTATE INVESTMENT TRUSTS -- 60.8%
APARTMENTS -- 7.8%
400 Avalonbay Communities, Inc............................. $ 18,375
300 Charles E. Smith Residential Realty Inc................ 13,200
5,000 Merry Land Properties, Inc.*........................... 28,125
1,500 Post Properties, Inc................................... 52,406
----------
112,106
----------
DIVERSIFIED -- 7.0%
700 Crescent Real Estate Equities Co....................... 14,087
21,500 Meditrust Cos.......................................... 59,125
400 Vornado Realty Trust................................... 13,925
700 Washington Real Estate Investment Trust................ 14,000
----------
101,137
----------
HEALTHCARE -- 4.8%
4,200 Senior Housing Properties Trust........................ 39,112
6,000 Ventas, Inc.*.......................................... 30,000
----------
69,112
----------
HOTEL/RESTAURANT -- 15.6%
1,600 Hospitality Properties Trust........................... 34,500
3,000 Host Marriot Corp...................................... 31,875
6,500 Innkeepers USA Trust................................... 66,219
20,000 InnSuites Hospitality Trust............................ 43,750
6,500 Winston Hotels, Inx.................................... 48,344
----------
224,688
----------
MANUFACTURED HOUSING -- 2.5%
1,200 Sun Communities, Inc................................... 36,450
----------
MORTGAGE -- 3.2%
1,800 Annaly Mortgage Management, Inc........................ 15,188
2,300 Apex Mortgage Capital, Inc............................. 16,399
1,600 Thornburg Mortgage Asset Corp.......................... 15,400
----------
46,987
----------
</TABLE>

<TABLE>
VALUE
SHARES
-------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------
<C> <S> <C>
NET LEASED -- 5.5%
7,000 Golf Trust of America, Inc............................. $ 78,750
----------
OFFICE/PROPERTY -- 5.1%
400 Boston Properties, Inc................................. 16,200
6,300 HRPT Properties Trust.................................. 40,556
300 Spieker Properties, Inc................................ 16,613
----------
73,369
----------
OUTLET CENTERS -- 1.3%
600 Chelsea GCA Realty, Inc................................ 19,350
----------
SHOPPING CENTERS -- 6.5%
5,500 JDN Realty Corp........................................ 60,156
800 Weingarten Realty Investors............................ 33,550
----------
93,706
----------
STORAGE -- 1.5%
77,000 Liberty Self-Stor, Inc................................. 21,660
----------
Total Real Estate Investment Trusts
(Cost $913,937)...................................... 864,115
----------
OTHER REAL ESTATE RELATED -- 33.6%
COMMERCIAL SERVICES -- 5.4%
5,100 Cendant Corp.*......................................... 61,200
19,000 Crescent Operating, Inc.*.............................. 17,220
----------
78,420
----------
ELECTRICITY -- 3.9%
2,500 Avista Corp............................................ 56,094
----------
HOTELS -- 4.9%
21,500 Host Funding, Inc.*.................................... 20,156
31,000 Wyndham International*................................. 50,375
----------
70,531
----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

14
<PAGE>
[FBR LOGO]
FBR FAMILY OF FUNDS
----------------

FBR REALTY GROWTH FUND

PORTFOLIO OF INVESTMENTS (CONTINUED)

OCTOBER 31, 2000

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
<C> <S> <C>
VALUE
SHARES
-------------------------------------------------------------------------------
REAL ESTATE DEVELOPMENT -- 5.8%
3,500 Catellus Development Corp.*............................ $ 63,656
1,000 St. Joe Co............................................. 20,188
----------
83,844
----------
REAL ESTATE INVESTMENT/MANAGEMENT -- 5.2%
90,000 Banyan Hotel Investment Fund*.......................... 24,300
16,000 Liberte Investors, Inc................................. 50,000
----------
74,300
----------
TRANSPORT -- 4.4%
1,200 Florida East Coast Railway Co.......................... 42,900
600 Florida East Coast Railway Co. Class B................. 20,437
----------
63,337
----------
TRIPLE NET LEASED -- 4.0%
400 American Tower Corp., Class A*......................... 16,375
500 Crown Castle International Corp.*...................... 15,156
1,300 Spectrasite Holdings, Inc.*............................ 25,675
----------
57,206
----------
Total Other Real Estate Related
(Cost $610,695)...................................... 496,932
----------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C>
SHORT-TERM INVESTMENT -- 6.1%
REPURCHASE AGREEMENT -- 6.1%
$88,000 PaineWebber Incorporated
6.3%, dated 10/31/00, to be repurchased on 11/1/00
at $88,015 (Collateral: $87,476 U.S. Treasury Notes,
7.875%, due 8/15/01, value $88,482)
(Cost $88,000)...................................... 88,000
----------
Total Investments -- 100.5%
(Cost $1,612,632)................................... 1,449,047
Liabilities in Excess of Other Assets -- (0.5)%....... (7,115)
----------
Net Assets -- 100.0%.................................. $1,441,932
==========
</TABLE>

------------------

* Non-income producing

The accompanying notes are an integral part of the financial statements.

15
<PAGE>
[FBR LOGO]
FBR FAMILY OF FUNDS
----------------

STATEMENTS OF ASSETS AND LIABILITIES

OCTOBER 31, 2000

<TABLE>
<CAPTION>
FBR FBR FBR FBR
FINANCIAL SMALL CAP SMALL CAP REALTY
SERVICES FUND FINANCIAL FUND VALUE FUND GROWTH FUND
------------- -------------- ---------- -----------
<S> <C> <C> <C> <C>
ASSETS
Investments, at cost...................................... $22,274,984 $44,490,005 $ 7,800,058 $1,612,632
=========== =========== =========== ==========
Investments, at value..................................... $25,723,722 $45,224,254 $10,314,646 $1,449,047
Cash...................................................... 261,776 1,875,068 445 434
Receivable for Investments Sold........................... -- -- -- 8,706
Receivable for Fund Shares Sold........................... 316,725 628,033 1,804 60
Dividend and Interest Receivable.......................... 38,726 15,076 48 4,040
Receivable from investment adviser........................ -- -- 21,153 20,522
Deferred organization costs and other assets.............. 8,370 16,249 14,241 7,905
----------- ----------- ----------- ----------
Total assets............................................ 26,349,319 47,758,680 10,352,337 1,490,714
----------- ----------- ----------- ----------
LIABILITIES
Payable for Fund shares redeemed.......................... 27,977 47,462 7,196 --
Payable for investments purchased......................... 623,782 257,073 -- 5,702
Distribution fees payable................................. 31,096 38,393 13,953 2,283
Advisory fees payable..................................... 11,677 35,854 -- --
Accrued expenses and other liabilities.................... 61,830 66,750 51,768 40,797
----------- ----------- ----------- ----------
Total liabilities....................................... 756,362 445,532 72,917 48,782
----------- ----------- ----------- ----------
NET ASSETS
Capital Stock (unlimited number of shares authorized, with
no par value)............................................ 25,451,113 52,581,801 7,431,048 2,383,861
Under/(over) distributed net investment income............ 245,448 249,304 -- (6,474)
Accumulated net realized (loss) gain from investments..... (3,552,342) (6,252,206) 333,784 (771,870)
Net unrealized appreciation (depreciation) on
investments.............................................. 3,448,738 734,249 2,514,588 (163,585)
----------- ----------- ----------- ----------
Net assets applicable to shares outstanding............... $25,592,957 $47,313,148 $10,279,420 $1,441,932
=========== =========== =========== ==========
Shares outstanding........................................ 1,475,914 2,950,686 528,221 173,105
=========== =========== =========== ==========
Net asset value, offering and redemption price per
share.................................................... $17.34 $16.03 $19.46 $8.33
=========== =========== =========== ==========
</TABLE>

The accompanying notes are an integral part of the financial statements.

16
<PAGE>
[FBR LOGO]
FBR FAMILY OF FUNDS
----------------

STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED OCTOBER 31, 2000

<TABLE>
<CAPTION>
FBR FBR FBR FBR
FINANCIAL SMALL CAP SMALL CAP REALTY
SERVICES FUND FINANCIAL FUND VALUE FUND GROWTH FUND
------------- -------------- ---------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 688,138 $ 626,951 $ 22,942 $ 85,098
Interest.................................................. 35,303 146,630 6,105 2,849
----------- ----------- ---------- ---------
Total Investment Income................................. 723,441 773,581 29,047 87,947
----------- ----------- ---------- ---------
EXPENSES
Advisory fees............................................. 212,120 253,592 109,633 15,738
Transfer agent fees and expenses.......................... 85,896 99,269 55,206 43,462
Administration and accounting fees........................ 38,090 41,484 20,714 53,025
Distribution fees......................................... 58,802 70,442 30,454 3,935
Audit and legal fees...................................... 44,345 63,879 75,689 57,036
Printing.................................................. 13,455 17,034 15,900 825
Federal and state registration fees....................... 20,540 10,980 9,150 4,575
Custodian fees and expenses............................... 16,978 20,061 12,930 14,373
Insurance................................................. 7,529 7,653 5,711 4,510
Trustees' fees and expenses............................... 7,984 7,840 7,775 7,952
Amortization of organization expenses..................... 7,174 7,174 7,174 --
Other Fees................................................ 2,679 (660) 10,615 453
----------- ----------- ---------- ---------
Total expenses before waivers and related
reimbursements......................................... 515,592 598,748 360,951 205,884
Less waivers and related reimbursements................. (63,438) (62,599) (123,408) (174,932)
----------- ----------- ---------- ---------
Total expenses after waivers and related
reimbursements......................................... 452,154 536,149 237,543 30,952
----------- ----------- ---------- ---------
Net Investment Income (Loss).............................. 271,287 237,432 (208,496) 56,995
----------- ----------- ---------- ---------
NET REALIZED AND UNREALIZED (LOSS) GAIN ON INVESTMENTS
Net Realized (Loss) Gain on Investment Transactions....... (3,357,456) (3,043,019) 462,774 (266,395)
Change in Net Unrealized Appreciation/
Depreciation of Investments.............................. 3,473,762 5,699,811 2,032,070 187,244
----------- ----------- ---------- ---------
Net Gain (Loss) on Investments............................ 116,306 2,656,792 2,494,844 (79,151)
----------- ----------- ---------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................... $ 387,593 $ 2,894,224 $2,286,348 $ (22,156)
=========== =========== ========== =========
</TABLE>

The accompanying notes are an integral part of the financial statements.

17
<PAGE>
[FBR LOGO]
FBR FAMILY OF FUNDS
----------------
STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FBR FINANCIAL SERVICES FUND
------------------------------
FOR THE YEARS
ENDED OCTOBER 31,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES
Net Investment Income (Loss).................... $ 271,287 $ 168,364
Net Realized Gain (Loss) on Investment
Transactions................................... (3,357,456) 478,246
Change in Net Unrealized
Appreciation/Depreciation of Investments....... 3,473,762 2,154,719
----------- ------------
Net Increase (Decrease) in Net Assets Resulting
from Operations................................ 387,593 2,801,329
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income........................... (144,149) (341,817)
Net Realized Gain on Investments................ (229,257) (3,690,277)
Tax return of capital........................... -- --
----------- ------------
Total Distributions to Shareholders............. (373,406) (4,032,094)
----------- ------------
FROM SHARE TRANSACTIONS
Net Proceeds from Sales of Shares............... 11,561,015 3,409,487
Reinvestment of Distributions................... 365,099 3,890,730
Cost of Shares Redeemed......................... (17,028,800) (26,108,166)
----------- ------------
Net Decrease in Net Assets Resulting from Share
Transactions................................... (5,102,686) (18,807,949)
----------- ------------
Total Decrease in Net Assets.................... (5,088,499) (20,038,714)
Net Assets -- Beginning of Year................... 30,681,456 50,720,170
----------- ------------
Net Assets -- End of Year......................... $25,592,957 $ 30,681,456
=========== ============
SHARES ISSUED AND REDEEMED:
Sold............................................ 785,453 205,789
Issued in Reinvestment of Distributions......... 27,267 245,329
Redeemed*....................................... (1,186,387) (1,595,321)
----------- ------------
Net Decrease in Shares.......................... (373,667) (1,144,203)
=========== ============
</TABLE>

------------------

* There is a 1% redemption fee on fund shares redeemed which have been held
90 days or less. For the year ended October 31, 1999 these fees were
$1,531, $915, $1,303 and $88 for Financial Services Fund, Small Cap
Financial Fund, Small Cap Value Fund and Realty Growth Fund, respectively.
For the year ended October 31, 2000, these fees were $86,428, $207,736,
$384 and $15 for Financial Services Fund, Small Cap Financial Fund, Small
Cap Value Fund and Realty Growth Fund, respectively.

The accompanying notes are an integral part of the financial statements.

18
<PAGE>
<TABLE>
<CAPTION>
FBR SMALL CAP FINANCIAL FUND FBR SMALL CAP VALUE FUND
---------------------------- ------------------------------
FOR THE YEARS FOR THE YEARS
ENDED OCTOBER 31, ENDED OCTOBER 31,
---------------------------- ------------------------------
2000 1999 2000 1999
----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES
Net Investment Income (Loss).................... $ 237,432 $ 50,268 $ (208,496) $ (225,053)
Net Realized Gain (Loss) on Investment
Transactions................................... (3,043,019) (2,955,966) 462,774 (98,137)
Change in Net Unrealized
Appreciation/Depreciation of Investments....... 5,699,811 4,932,426 2,032,070 2,794,280
----------- ------------ ----------- -----------
Net Increase (Decrease) in Net Assets Resulting
from Operations................................ 2,894,224 2,026,728 2,286,348 2,471,090
----------- ------------ ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income........................... (34,344) (234,650) -- --
Net Realized Gain on Investments................ -- (6,461,151) -- (464,197)
Tax return of capital........................... -- -- -- --
----------- ------------ ----------- -----------
Total Distributions to Shareholders............. (34,344) (6,695,801) -- (464,197)
----------- ------------ ----------- -----------
FROM SHARE TRANSACTIONS
Net Proceeds from Sales of Shares............... 55,152,484 3,677,672 728,316 2,554,656
Reinvestment of Distributions................... 32,984 6,489,666 -- 454,755
Cost of Shares Redeemed......................... (43,373,057) (28,332,723) (6,558,391) (6,838,679)
----------- ------------ ----------- -----------
Net Decrease in Net Assets Resulting from Share
Transactions................................... 11,812,411 (18,165,385) (5,830,075) (3,829,268)
----------- ------------ ----------- -----------
Total Decrease in Net Assets.................... 14,672,291 (22,834,458) (3,543,727) (1,822,375)
Net Assets -- Beginning of Year................... 32,640,857 55,475,315 13,823,147 15,645,522
----------- ------------ ----------- -----------
Net Assets -- End of Year......................... $47,313,148 $ 32,640,857 $10,279,420 $13,823,147
=========== ============ =========== ===========
SHARES ISSUED AND REDEEMED:
Sold............................................ 3,622,116 251,199 38,437 159,802
Issued in Reinvestment of Distributions......... 2,510 453,578 -- 31,805
Redeemed*....................................... (2,963,548) (1,967,951) (345,343) (423,286)
----------- ------------ ----------- -----------
Net Decrease in Shares.......................... (661,078) (1,263,174) (306,906) (231,679)
=========== ============ =========== ===========

<CAPTION>
FBR REALTY GROWTH FUND
------------------------------
FOR THE YEARS
ENDED OCTOBER 31,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES
Net Investment Income (Loss).................... $ 56,995 $ 93,938
Net Realized Gain (Loss) on Investment
Transactions................................... (266,395) (228,634)
Change in Net Unrealized
Appreciation/Depreciation of Investments....... 187,244 71,473
---------- ----------
Net Increase (Decrease) in Net Assets Resulting
from Operations................................ (22,156) (63,223)
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income........................... (64,231) (73,766)
Net Realized Gain on Investments................ -- --
Tax return of capital........................... (9,629) (25,092)
---------- ----------
Total Distributions to Shareholders............. (73,860) (98,858)
---------- ----------
FROM SHARE TRANSACTIONS
Net Proceeds from Sales of Shares............... 280,238 438,779
Reinvestment of Distributions................... 65,513 86,206
Cost of Shares Redeemed......................... (502,445) (954,915)
---------- ----------
Net Decrease in Net Assets Resulting from Share
Transactions................................... (156,694) (429,930)
---------- ----------
Total Decrease in Net Assets.................... (252,710) (592,011)
Net Assets -- Beginning of Year................... 1,694,642 2,286,653
---------- ----------
Net Assets -- End of Year......................... $1,441,932 $1,694,642
========== ==========
SHARES ISSUED AND REDEEMED:
Sold............................................ 33,096 45,274
Issued in Reinvestment of Distributions......... 7,551 9,040
Redeemed*....................................... (58,890) (99,305)
---------- ----------
Net Decrease in Shares.......................... (18,243) (44,991)
========== ==========
</TABLE>

19
<PAGE>
[FBR LOGO]
FBR Family of Funds
----------------

FINANCIAL HIGHLIGHTS

---------------------------------------------------------------------------

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 each period. This information has been derived from
information provided in the financial statements.
--------------------------------------------------------------------------------

NET NET DISTRIBUTIONS
ASSET REALIZED AND DIVIDENDS FROM NET
VALUE, NET UNREALIZED FROM NET REALIZED
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT CAPITAL
OF PERIOD INCOME/(LOSS)*(1) INVESTMENTS*(2) INCOME GAINS
----------- ----------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
FBR FINANCIAL SERVICES FUND
For the fiscal year ended
October 31, 2000......... $16.59 $ 0.18 $ 0.78 $(0.08) $(0.13)
For the fiscal year ended
October 31, 1999......... 16.94 0.09 0.97 (0.12) (1.29)
For the fiscal year ended
October 31, 1998......... 16.03 0.10 1.04 (0.04) (0.19)
For the period January 3,
1997** through October
31, 1997................. 12.00 0.04 3.99 -- --

FBR SMALL CAP FINANCIAL FUND
For the fiscal year ended
October 31, 2000......... 14.26 0.08 1.71 (0.02) --
For the fiscal year ended
October 31, 1999......... 15.62 0.02 0.62 (0.07) (1.93)
For the fiscal year ended
October 31, 1998......... 17.53 0.08 (1.81) (0.03) (0.15)
For the period January 3,
1997** through October
31, 1997................. 12.00 0.02 5.51 -- --

FBR SMALL CAP VALUE FUND
For the fiscal year ended
October 31, 2000......... 16.55 (0.39) 3.30 -- --
For the fiscal year ended
October 31, 1999......... 14.67 (0.27) 2.58 -- (0.43)
For the fiscal year ended
October 31, 1998......... 16.70 (0.08) (1.46) -- (0.49)
For the period January 3,
1997** through October
31, 1997................. 12.00 (0.05) 4.75 -- --

FBR REALTY GROWTH FUND
For the fiscal year ended
October 31, 2000......... 8.86 0.29 (0.40) (0.36) --
For the fiscal year ended
October 31, 1999......... 9.68 0.47 (0.81) (0.35) --
For the period April 1,
1998*** through October
31, 1998................. 14.51 0.22 (3.57) (0.13) (1.35)
For the fiscal year ended
March 31, 1998........... 12.69 0.11 3.00 (0.11) (1.18)
For the fiscal year ended
March 31, 1997........... 10.09 0.33 4.14 (0.33) (1.53)
For the period July 3,
1995** through March 31,
1996..................... 10.00 0.20 0.36 (0.20) (0.22)
</TABLE>

------------------------

* Calculated based on shares outstanding on the first and last day of the
respective periods, except for dividends and distributions, if any, which
are based on the actual shares outstanding on the dates of distributions.
** Commencement of investment operations
*** Reported amounts include the results of operations of the FBR Realty Growth
Fund for the period April 1, 1998 through October 31, 1998. Prior to
September 18, 1998, the FBR Realty Growth Fund operated as the
GrandView-SM- Realty Growth Fund, which had a fiscal year end of March 31,
1998.
(1) Reflects waivers and related reimbursements.
(2) The amounts shown for a share outstanding throughout the respective periods
may not be in accordance with the changes in the aggregate gains and losses
in investments during the respective periods because of the timing of sales
and repurchases of Fund shares in relation to fluctuating net asset values
during the respective periods.
(3) Total investment return is calculated assuming a purchase of shares on the
first day and a sale on the last day of each period reported and will
include reinvestment of dividends and distributions, if any. Total
investment return is not annualized.
(4) Annualized

The accompanying notes are an integral part of the financial statements.

20
<PAGE>
<TABLE>
<CAPTION>

NET NET RATIO OF NET
DISTRIBUTIONS ASSET ASSETS, RATIO OF INVESTMENT
FROM TAX VALUE, TOTAL END OF EXPENSES TO INCOME/(LOSS)
RETURN OF END OF INVESTMENT PERIOD AVERAGE NET TO AVERAGE
CAPITAL PERIOD RETURN(3) (000'S OMITTED) ASSETS(1) NET ASSETS(1)
------------- ----------- ----------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
FBR FINANCIAL SERVICES FUND
For the fiscal year ended
October 31, 2000......... -- $17.34 6.21% $25,593 1.92% 1.15%
For the fiscal year ended
October 31, 1999......... -- 16.59 6.80 30,681 1.88 0.43
For the fiscal year ended
October 31, 1998......... -- 16.94 7.12 50,720 1.65 0.61
For the period January 3,
1997** through October
31, 1997................. -- 16.03 33.58 23,985 1.65(4) 0.57(4)

FBR SMALL CAP FINANCIAL FUND
For the fiscal year ended
October 31, 2000......... -- 16.03 12.56 47,313 1.90 0.84
For the fiscal year ended
October 31, 1999......... -- 14.26 4.19 32,641 1.89 0.12
For the fiscal year ended
October 31, 1998......... -- 15.62 (9.99) 55,475 1.63 0.35
For the period January 3,
1997** through October
31, 1997................. -- 17.53 46.08 43,362 1.65(4) 0.57(4)

FBR SMALL CAP VALUE FUND
For the fiscal year ended
October 31, 2000......... -- 19.46 17.58 10,279 1.95 (1.71)
For the fiscal year ended
October 31, 1999......... -- 16.55 16.24 13,823 1.92 (1.46)
For the fiscal year ended
October 31, 1998......... -- 14.67 (9.57) 15,646 1.65 (0.81)
For the period January 3,
1997** through October
31, 1997................. -- 16.70 39.17 8,269 1.65(4) (0.79)(4)

FBR REALTY GROWTH FUND
For the fiscal year ended
October 31, 2000......... (0.06) 8.33 (1.41) 1,442 1.97 3.62
For the fiscal year ended
October 31, 1999......... (0.13) 8.86 (3.77) 1,695 2.00 4.68
For the period April 1,
1998*** through October
31, 1998................. -- 9.68 (21.14) 2,287 2.00(4) 2.98(4)
For the fiscal year ended
March 31, 1998........... -- 14.51 24.80 2,376 2.00 0.59
For the fiscal year ended
March 31, 1997........... (0.01) 12.69 45.12 1,158 1.89 3.12
For the period July 3,
1995** through March 31,
1996..................... (0.05) 10.09 5.70 182 2.00(4) 3.62(4)

<CAPTION>
INCREASE/(DECREASE)
REFLECTED IN
EXPENSE RATIOS
AND NET
INVESTMENT
INCOME/(LOSS)
DUE TO WAIVERS PORTFOLIO
AND RELATED TURNOVER
REIMBURSEMENTS RATE
------------------- -----------
<S> <C> <C>
FBR FINANCIAL SERVICES FUND
For the fiscal year ended
October 31, 2000......... 0.27% 110.88%
For the fiscal year ended
October 31, 1999......... 0.34 70.25
For the fiscal year ended
October 31, 1998......... 0.22 105.58
For the period January 3,
1997** through October
31, 1997................. 1.42(4) 49.68
FBR SMALL CAP FINANCIAL FUND
For the fiscal year ended
October 31, 2000......... 0.23 81.74
For the fiscal year ended
October 31, 1999......... 0.29 25.00
For the fiscal year ended
October 31, 1998......... 0.14 94.23
For the period January 3,
1997** through October
31, 1997................. 1.43(4) 35.41
FBR SMALL CAP VALUE FUND
For the fiscal year ended
October 31, 2000......... 1.01 3.45
For the fiscal year ended
October 31, 1999......... 0.54 24.45
For the fiscal year ended
October 31, 1998......... 0.60 78.26
For the period January 3,
1997** through October
31, 1997................. 3.84(4) 42.59
FBR REALTY GROWTH FUND
For the fiscal year ended
October 31, 2000......... 11.11 133.00
For the fiscal year ended
October 31, 1999......... 5.97 138.65
For the period April 1,
1998*** through October
31, 1998................. 3.41(4) 136.24
For the fiscal year ended
March 31, 1998........... 3.68 170.19
For the fiscal year ended
March 31, 1997........... 7.70 197.90
For the period July 3,
1995** through March 31,
1996..................... 29.34(4) 44.44
</TABLE>

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FBR FINANCIAL SERVICES FUND
FBR SMALL CAP FINANCIAL FUND
FBR SMALL CAP VALUE FUND
FBR REALTY GROWTH FUND

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The FBR Family of Funds (the "Trust") is an open-end management investment
company organized as a business trust under the laws of the State of Delaware on
April 30, 1996. The Trust currently consists of five 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 Value Fund ("Small Cap Value Fund"), FBR Realty
Growth Fund ("Realty Growth Fund") (each a "Fund" and collectively, the "Funds")
and FBR Technology Fund. Financial Services Fund, Small Cap Financial Fund and
Realty Growth Fund are diversified portfolios and Small Cap Value Fund and FBR
Technology Fund are non-diversified portfolios. Each Fund is treated as a
separate entity for certain matters under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and for other purposes, and a
shareholder of one Fund is not deemed to be a shareholder of any other Fund.

Prior to December 21, 1998, the Funds offered three classes of shares which were
designated as Class A, B and C shares. Effective December 21, 1998, the Funds'
Class B and C shares (except for the Realty Growth Fund) were converted to
Class A shares, which have been redesignated as fund shares. As of the date
hereof, the Funds offer one class of shares, which are offered as no-load
shares. Each Fund has an unlimited number of shares authorized with no par
value. Financial Services Fund, Small Cap Financial Fund and Small Cap Value
Fund commenced investment operations on January 3, 1997. Realty Growth Fund
commenced investment operations on September 18, 1998. Currently, shares of the
FBR Technology Fund are not being offered. However, a registration statement
relating to these securities filed with the Securities and Exchange Commission
is effective but has yet to commence its public offering.

Investment operations of the Realty Growth Fund were constituted pursuant to an
Agreement and Plan of Reorganization (the "Reorganization Plan"), which included
the liquidation and termination of the GrandView-SM- Realty Growth Fund and the
GrandView-SM- S&P-Registered Trademark- REIT Index Fund (collectively the
"GrandView Funds"). The Reorganization Plan was consummated on September 18,
1998, with each shareholder of the GrandView Funds receiving on such date that
number of shares of the Realty Growth Fund having an aggregate net asset value
equal to the aggregate net asset value of such shareholder's shares of the
GrandView Funds. Shareholders in the GrandView Funds received Class A shares,
which have been redesignated as fund shares, of the Realty Growth Fund. The
GrandView-SM- Realty Growth Fund's historical financial data is presented as
part of the Realty Growth Fund's financial statements, as the objectives and
adviser of the GrandView-SM- Realty Growth Fund continue under the Realty Growth
Fund.

ORGANIZATIONAL MATTERS -- Prior to commencing investment operations on
January 3, 1997, the Financial Services Fund, Small Cap Financial Fund and Small
Cap Value Fund did not have any transactions other than those relating to
organizational matters and the sale of 2,777, 2,778 and 2,778 fund shares,
respectively, to Friedman, Billings, Ramsey & Co., Inc. ("FBR") on December 16,
1996. Prior to commencing investment operations on September 18, 1998, the
Realty Growth Fund did not have any transactions other than those relating to
organizational matters and

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FBR FINANCIAL SERVICES FUND
FBR SMALL CAP FINANCIAL FUND
FBR SMALL CAP VALUE FUND
FBR REALTY GROWTH FUND

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
the sale of three fund shares to FBR Fund Advisers, Inc. (the "Adviser") on
September 15, 1998. Costs of approximately $35,784, $35,784 and $35,785 which
were incurred by Financial Services Fund, Small Cap Financial Fund and Small Cap
Value Fund, respectively, in connection with the organization of its shares 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 FBR, the Adviser or any
transferee thereof redeems any of its original shares in any such 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 such Funds are liquidated prior to the end of the sixty month
period, FBR, the Adviser or any transferee thereof shall bear the unamortized
deferred organization expenses. Costs incurred in connection with the
Reorganization Plan were borne by the Adviser.

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 the
close of regular trading on the New York Stock Exchange (normally 4:00 p.m., New
York time) on each business day that the exchange is open for trading. Each
Fund's securities are valued at the last sale price on the securities exchange
or national securities market on which such securities are primarily 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 (of which there were
none as of October 31, 2000) for which recent market quotations are not readily
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 the Board of Trustees (of which there are none at
October 31, 2000), are valued at fair value 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 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.

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FBR FINANCIAL SERVICES FUND
FBR SMALL CAP FINANCIAL FUND
FBR SMALL CAP VALUE FUND
FBR REALTY GROWTH FUND

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

When a Fund writes an option, an amount equal to the premium received by the
Fund is recorded as a liability and is subsequently adjusted to the current
market value of the option written. Premiums received from writing options which
expire unexercised are recorded by a Fund on the expiration date as realized
gains from options transactions. The difference between the premium and the
amount paid on effecting a closing purchase transaction, including brokerage
commissions, is also treated as a realized gain, or if the premium is less than
the amount paid for the closing purchase transaction, as a realized loss. If a
call option is exercised, the premium is added to the proceeds from the sale of
the underlying securities in determining whether a Fund has a realized gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
securities purchased by a Fund. Each Fund's use of written options involves, to
varying degrees, elements of market risk in excess of the amount recognized in
the Statement of Assets and Liabilities. The contract or notional amounts
reflect the extent of a Fund's involvement in these financial instruments. In
writing an option, a Fund bears the market risk of an unfavorable change in the
price of the security underlying the written option. Exercise of an option
written by a Fund could result in a Fund selling or buying a security at a price
different from the current market value. A Fund's activities in written options
are conducted through regulated exchanges which do not result in counterparty
credit risks. The Funds did not engage in options transactions during the fiscal
year ended October 31, 2000.

SHORT SELLING -- When a Fund makes a short sale, an amount equal to the proceeds
received by the Fund is recorded as a liability and is subsequently adjusted to
the current market value of the short sale. Short sales represent obligations of
a Fund to make future delivery of specific securities and, correspondingly,
create an obligation to purchase the security at market prices prevailing at the
later delivery date (or to deliver the security if already owned by the Fund).
Upon the termination of a short sale, a Fund will recognize a gain, limited to
the price at which the Fund sold the security short, if the market price is less
than the proceeds originally received. A Fund will recognize a loss, unlimited
in magnitude, if the market price at termination is greater than the proceeds
originally received. As a result, short sales create the risk that a Fund's
ultimate obligation to satisfy the delivery requirements may exceed the amount
of the proceeds initially received or the liability recorded in the financial
statements. The Funds did not engage in short selling during the fiscal year
ended October 31, 2000.

REPURCHASE AGREEMENTS -- Each Fund has agreed to purchase securities from
financial institutions subject to the seller's agreement to repurchase them at
an agreed-upon time and price ("repurchase agreement"). The financial
institutions with whom each Fund enters into repurchase agreements are banks and
broker/dealers which the Adviser considers creditworthy pursuant to criteria
approved by the Trust's Board of Trustees. The seller under a repurchase
agreement will be required to maintain the value of the securities as
collateral, subject to the agreement at not less than the repurchase price plus
accrued interest. The Adviser marks to market daily the value of the collateral,
and, if necessary, requires the seller to maintain additional securities, to
ensure that the value is not less than the repurchase price. Default by or
bankruptcy of the seller would, however, expose each Fund to possible loss
because of adverse market action or delays in connection with the disposition of
the underlying securities.

INVESTMENT TRANSACTIONS AND INVESTMENT INCOME -- Transactions are accounted for
on the trade date (the day in which the order to buy or sell is executed). The
cost of investments sold is determined by use of the specific

24
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FBR FINANCIAL SERVICES FUND
FBR SMALL CAP FINANCIAL FUND
FBR SMALL CAP VALUE FUND
FBR REALTY GROWTH FUND

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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. The Funds' record distributions received from its investments in real
estate investment trusts that represent a tax return of capital as a reduction
of the cost basis of investments. 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 of each of the
Funds, except for the Realty Growth Fund which will be declared and paid
quarterly to shareholders. Distributions from net realized capital gains, if
any, will be distributed at least annually for each Fund. 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.
These "book/tax" differences are considered either temporary or permanent in
nature. To the extent differences are permanent in nature, such amounts are
reclassified within capital accounts based on their U.S. federal tax-basis
treatment, and temporary differences do not require reclassification.

At October 31, 2000, the Realty Growth Fund reclassified $4,563 and $7,505
within the composition of net assets from undistributed net investment income to
net realized loss on investment transactions and net unrealized
appreciation/(depreciation) on investments, respectively. The Small Cap Value
Fund reclassified $208,496 of net investment loss to capital stock.

U.S. FEDERAL TAX STATUS -- Each Fund intends to distribute substantially all of
its taxable income and to comply with the requirements of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment companies.
Accordingly, no provision for U.S. federal income taxes is required. In
addition, by distributing during each calendar year substantially all of its
ordinary income and capital gains, if any, each Fund intends not to be subject
to a U.S. federal excise tax.

At October 31, 2000, certain of the Funds had capital loss carryforwards
available as a reduction to the extent provided in regulations of any future net
capital gains realized before the end of fiscal year 2008. To the extent that
the capital loss carryforwards are used to offset future capital gains, it is
probable that the gains so offset will not be distributed to shareholders. The
Funds had the following capital loss carryforwards at October 31, 2000:

<TABLE>
<CAPTION>
EXPIRES OCTOBER 31,
-------------------------------------
FUND 2006 2007 2008
---- --------- ----------- -----------
<S> <C> <C> <C>
Financial Services...................................... -- -- $3,306,336
Small Cap Financial Fund................................ -- $3,020,811 3,124,552
Realty Growth Fund...................................... $227,439 235,086 217,548
</TABLE>

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FBR FINANCIAL SERVICES FUND
FBR SMALL CAP FINANCIAL FUND
FBR SMALL CAP VALUE FUND
FBR REALTY GROWTH FUND

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

FBR Fund Advisers, Inc. serves as each Fund's investment adviser. For its
advisory services, the Adviser is entitled to receive a monthly fee equal to an
annual rate of each Fund's average daily net assets, computed daily and paid
monthly as follows:

<TABLE>
<CAPTION>
FUND
----
<S> <C>
Financial Services Fund..................................... 0.90%
Small Cap Financial Fund.................................... 0.90
Small Cap Value Fund........................................ 0.90
Realty Growth Fund.......................................... 1.00
</TABLE>

The Adviser has contractually undertaken to limit each Fund's total operating
expenses to the extent that such expenses exceed 1.95% of each Fund's average
daily net assets. Prior to February 28, 2000, the Adviser had contractually
undertaken to limit the Realty Growth Fund's total operating expenses to the
extent that such expenses exceeded 2.00% of its average daily net assets. As
necessary, these limitations were effected by waivers by the Adviser of its
advisory fees and reimbursements of expenses exceeding the advisory fee. For the
year ended October 31, 2000, advisory fees, waivers and reimbursements of
expenses were as follows:

<TABLE>
<CAPTION>
GROSS ADVISORY NET
ADVISORY FEE ADVISORY EXPENSE
FUND FEES WAIVERS FEES REIMBURSEMENTS
---- --------- --------- --------- ----------------
<S> <C> <C> <C> <C>
Financial Services Fund........... $212,120 $(63,438) $148,682 --
Small Cap Financial Fund.......... 253,592 (62,599) 190,993 --
Small Cap Value Fund.............. 109,633 (69,362) 40,271 $ (54,046)
Realty Growth Fund................ 15,738 (15,738) -- (159,194)
</TABLE>

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 which it may assume.

SUB-ADVISORY AGREEMENT -- SMALL CAP VALUE FUND -- At a Special Meeting of
Shareholders held on June 1, 2000, the shareholders of the Small Cap Value Fund
approved a new Sub-Advisory Agreement. Out of 619,098 shares outstanding,
385,101 shares voted for and 7,721 shares voted against the proposal, and 7,844
abstained. Effective on such date, the Adviser retained Akre Capital Management,
LLC ("ACM") to serve as investment sub-adviser to the Small Cap Value Fund.
Charles Thomas Akre, Jr., the managing member of ACM, has served as portfolio
manager of the Small Cap Value Fund since its commencement of operations.

Under the terms of the Sub-Advisory Agreement, the Adviser, and not the Small
Cap Value Fund, will pay ACM an annual fee equal to the greater of (i) 0.40% of
the Small Cap Value Fund's average daily net assets (which shall be accrued
daily and paid monthly), or (ii) $3,500 per month. There is no change in the
advisory fee paid to the Adviser by the Small Cap Value Fund.

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FBR FINANCIAL SERVICES FUND
FBR SMALL CAP FINANCIAL FUND
FBR SMALL CAP VALUE FUND
FBR REALTY GROWTH FUND

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The Trust, on behalf of each Fund, has adopted an amended and restated
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Investment
Company Act. Under the Plan, each Fund pays FBR Investment Services, Inc. (the
"Distributor") a fee at an annual rate of 0.25% of each Fund's average daily net
assets. Fees paid to the Distributor under the Plan are payable without regard
to actual expenses incurred.

For the fiscal year ended October 31, 2000, the Financial Services Fund and
Small Cap Financial Fund paid $2,350 and $2,425, respectively, in brokerage
commissions from portfolio transactions executed on behalf of the Funds to FBR,
an affiliate of the Adviser and the Distributor.

3. INVESTMENT IN SECURITIES

For U.S. federal income tax purposes, the costs of securities owned, gross
appreciation, gross depreciation and net unrealized appreciation/(depreciation)
on investments for each Fund were as follows:

<TABLE>
<CAPTION>
NET
GROSS GROSS APPRECIATION/
FUND COST APPRECIATION DEPRECIATION (DEPRECIATION)
---- ------------ ------------- ------------- --------------
<S> <C> <C> <C> <C>
Financial Services.............. $22,390,386 $3,899,375 $ (566,039) $ 3,333,336
Small Cap Financial Fund........ 44,509,785 4,041,259 (3,326,790) 714,469
Small Cap Value Fund............ 7,800,058 3,274,674 (760,086) 2,514,588
Realty Growth Fund.............. 1,656,916 97,184 (305,053) (207,869)
</TABLE>

The Financial Services Fund, Small Cap Financial Fund and Realty Growth Fund had
cumulative wash sale losses for the year ended October 31, 2000 of $115,402,
$19,780 and $44,284, respectively.

For the fiscal year ended October 31, 2000, aggregate purchases and sales of
investment securities (excluding short-term investments) for each Fund were as
follows:

<TABLE>
<CAPTION>
FUND PURCHASES SALES
---- ------------ ------------
<S> <C> <C>
Financial Services Fund..................................... $25,944,431 $31,017,732
Small Cap Financial Fund.................................... 31,041,034 22,214,947
Small Cap Value Fund........................................ 423,224 6,437,027
Realty Growth Fund.......................................... 2,055,269 2,274,921
</TABLE>

4. SECURITIES LENDING

Loans of securities are required at all times to be secured by collateral equal
to at least 102% of the market value of the securities on loan. 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. In the
event that the borrower fails to return securities, and cash collateral being
maintained by the borrower is insufficient to cover the value of loaned
securities and provided such collateral insufficiency is not the result of
investment losses, the lending agent has agreed to pay the amount of the
shortfall to the Funds. The Funds had no securities on loan to brokers at
October 31, 2000.

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FBR FINANCIAL SERVICES FUND
FBR SMALL CAP FINANCIAL FUND
FBR SMALL CAP VALUE FUND
FBR REALTY GROWTH FUND

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

For the fiscal year ended October 31, 2000, income from securities lending was
$841, $1,460, $3,423 and $375 for the Financial Services Fund, Small Cap
Financial Fund, Small Cap Value Fund and Realty Growth Fund, respectively. Such
income from securities lending is included under the caption INTEREST in the
Statement of Operations.

5. MATERIAL TRUST AGREEMENTS

The Trust entered into new fund administration on custody agreements on August
11, 2000, with Rushmore Trust and Savings, FSB ("Rushmore"), under which
Rushmore provides administrative services and custody services for the Funds.
Prior to August 11, 2000, administrative services were performed by Bear Stearns
Financial Management, and accounting and custody services were performed by
PFPC, Inc.

On October 20, 1999, Friedman, Billings, Ramsey Group, Inc., parent of the
Adviser, reached a definitive agreement to acquire Rushmore and Money Management
Associates, LP, a registered investment adviser (the "Transaction"). The
Transaction is subject to various regulatory approvals and is anticipated to
close in the first quarter of 2001.

6. SUBSEQUENT EVENT

Pursuant to a transfer agency servicing agreement with the Funds dated November
1, 2000 Rushmore will provide transfer agency services for the Funds. Prior to
November 1, 2000, PFPC, Inc. provided transfer agency services for the Funds.

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FBR FINANCIAL SERVICES FUND

FBR SMALL CAP FINANCIAL FUND

FBR SMALL CAP VALUE FUND

FBR REALTY GROWTH FUND

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of Trustees

of the FBR Family of Funds:

We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments of the FBR Financial Services Fund, FBR Small Cap
Financial Fund, FBR Small Cap Value Fund, and FBR Realty Growth Fund (the
"Trust") as of October 31, 2000, and the related statements of operations, the
statements of changes in net assets, and the financial highlights for the
periods presented, excluding the periods indicated below. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for the periods presented prior to October 31, 1998 for the FBR
Realty Growth Fund were audited by other auditors whose report dated April 24,
1998, expressed an unqualified opinion thereon.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of October 31, 2000, by correspondence with
the custodian and brokers or by 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 the
FBR Financial Services Fund, FBR Small Cap Financial Fund, FBR Small Cap Value
Fund, and FBR Realty Growth Fund of the FBR Family of Funds as of October 31,
2000, the results of their operations, the changes in their net assets, and the
financial highlights for the periods presented, in conformity with accounting
principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Vienna, Virginia

December 8, 2000

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FBR FINANCIAL SERVICES FUND

FBR SMALL CAP FINANCIAL FUND

FBR SMALL CAP VALUE FUND

FBR REALTY GROWTH FUND

SHAREHOLDER TAX INFORMATION -- (UNAUDITED)

Each Fund is required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise its shareholders within 60 days of each Fund's fiscal year
end (October 31, 2000) as to the U.S. federal tax status of distributions
received by each Fund's shareholders in respect of such fiscal year. During the
fiscal year ended October 31, 2000, the following dividends and distributions
per share were paid by each of the Funds:

<TABLE>
<CAPTION>
FBR FINANCIAL FBR SMALL CAP FBR SMALL CAP FBR REALTY
SERVICES FUND FINANCIAL FUND VALUE FUND GROWTH FUND
------------- -------------- ------------- -----------
<S> <C> <C> <C> <C>
Net Investment Income $0.0835 $0.0167 -- $0.3594
Long-Term Capital Gains 0.1328 -- -- --
Tax Return of Capital -- -- -- 0.055
</TABLE>

Ordinary income dividends, which include short-term capital gain distributions,
should be reported as dividend income on Form 1040. Dividends from net
investment income are taxable as ordinary income, as are short-term capital gain
distributions. Tax return of capital distributions require a decrease to the
cost basis of a shareholder's fund shares.

Because each Fund's fiscal year is not the calendar year, another notification
will be sent with respect to calendar year 2000. The second notification, which
will reflect the amount, if any, to be used by calendar year taxpayers on their
U.S. federal income tax returns, will be made in conjunction with Form 1099-DIV
and will be mailed in January 2001.

Foreign shareholders will generally be subject to U.S. withholding tax on the
amount of their dividend. They will generally not be entitled to a foreign tax
credit or deduction for the withholding taxes paid by the Funds, if any.

In general, dividends received by tax-exempt recipients (e.g., IRAs and Keoghs)
need not be reported as taxable income for U.S. federal income tax purposes.
However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may
need this information for their annual information reporting.

Shareholders are advised to consult their own tax advisers with respect to the
tax consequences of their investment in the Funds.

30
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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

<TABLE>
<S> <C> <C>
F. David Fowler Trustee
George W. Grosz Trustee
Michael A. Willner Trustee
Winsor H. Aylesworth Vice President and
Treasurer
W. Bart Sanders Vice President
Edward J. Karpowicz Vice President and
Controller
Stephenie E. Adams Vice President and
Secretary
</TABLE>

INVESTMENT ADVISER
FBR Fund Advisers, Inc.
Potomac Tower
1001 Nineteenth Street North
Arlington, VA 22209

DISTRIBUTOR
FBR Investment Services, Inc.
Potomac Tower
1001 Nineteenth Street North
Arlington, VA 22209

ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
Rushmore Trust and Savings, FSB
4922 Fairmont Avenue
Bethesda, MD 20814

INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
8000 Towers Cresent Drive
Vienna, VA 22182

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, fees 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.

10/00ANN