ANNUAL REPORT
November 30, 1997
(LOGO)
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THE
CRUELTY FREE
VALUE FUND(TRADEMARK)
(LOGO)
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BEACON GLOBAL ADVISORS, INC
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THE CRUELTY FREE VALUE FUND
8260 Greensboro Drive, Suite 250
McLean, Virginia 22102-3801
January 15, 1998
Dear Shareholder,
It is a pleasure to provide you with the first annual report for The Cruelty
Free Value Fund dated November 30, 1997, the end of the Fund's fiscal year.
The Fund grew in excess of $1.1 million since its inception in April. The first
monies of the Fund were invested in the equity market on June 5th. The NAV on
that date was $25.00 and appreciated to $27.96 at the fiscal year end. This
compares favorably with the Russell 2000 Index, an index of small-capitalization
stocks, which rose 11.67% for the same period.
As The Cruelty Free Value Fund emphasizes investments in small to mid
capitalization stocks, we have been very pleased with its performance over the
first six months of existence, especially in light of all the market volatility
that has occurred during this period. Across the market spectrum of these firms,
we continue to look for companies that can create top line growth and leverage
that turn into robust earnings gains.
This past year's performance was led again by the financial services sector,
which rose about 53%. The Cruelty Free Value Fund benefited from its holdings in
regional bank stocks as well as some of the small S&L's and those companies that
will be able to take advantage of the very low interest rate environment, which
exists today. We anticipate many consumers will refinance home mortgages and in
turn pay down credit card debt. We would also look for companies that could
profit from a resurgence in the real estate market overall. For example, a
company already in the Fund is Dell Webb Corp. This firm is one of the leading
home builders in the west. The stock has performed extremely well since it was
purchased in August. There are many industries that feed into the housing market
that should also profit if the real estate sector should rebound.
The Fund is dedicated to providing an investment program to help end the
suffering, abuse and extinction of animals and at the same time provide an
outstanding investment opportunity.
The continued expression of interest in The Cruelty Free Value Fund has been
rewarding. Please direct inquires or questions to Beacon Global Advisors, Inc.
at 1-800-662-9992.
Thank you for your support.
Sincerely,
/s/RICHARD A. OLLEN
Richard A. Ollen
President & Chairman of the Board
THE CRUELTY FREE VALUE FUND
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THE CRUELTY FREE VALUE FUND
SCHEDULE OF INVESTMENTS NOVEMBER 30, 1997
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MARKET
SHARES VALUE
------ --------
COMMON STOCKS - 80.93%
BASIC MATERIALS & PROCESSING - 12.96%
1,200 AK Steel Holding Corp. ................................ $ 23,625
700 AMCOL International Corp. ............................. 16,800
400 Ball Corp. ............................................ 15,400
700 Intermet Corp. ........................................ 12,950
600 Quanex Corp. .......................................... 17,850
2,000 RMI Titanium Co.* ..................................... 47,500
800 Webb (Del E.) Corp. ................................... 17,300
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151,425
--------
CONSUMER DISCRETIONARY - 9.04%
1,500 Finish Line, Inc. (The), Class A* ..................... 28,500
700 Haggar Corp. .......................................... 11,113
300 Harman International Industries, Inc. ................. 15,187
700 Heilig-Meyers Co. ..................................... 9,056
1,200 Insurance Auto Auctions, Inc.* ........................ 13,200
700 Reynolds & Reynolds Co., Class A ...................... 13,388
300 Springs Industries, Inc., Class A ..................... 15,131
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105,575
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FINANCIAL SERVICES - 25.82%
900 Acceptance Insurance Cos., Inc.* ...................... 21,881
535 Associated Banc-Corp. ................................. 26,616
400 Astoria Financial Corp. ............................... 22,050
700 Compass Bancshares, Inc. .............................. 28,000
1,400 Doral Financial Corp. ................................. 30,450
500 FBL Financial Group, Inc., Class A .................... 19,750
1,200 Imperial Credit Industries, Inc.* ..................... 28,725
700 Lawyers Title Corp. ................................... 22,225
600 Long Island Bancorp, Inc. ............................. 28,275
700 North Fork Bancorporation, Inc. ....................... 21,263
700 Southern Pacific Funding Corp.* ....................... 8,663
1,100 Sovereign Bancorp, Inc. ............................... 20,831
700 TR Financial Corp. .................................... 23,012
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301,741
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HEALTHCARE - 1.08%
800 Apria Healthcare Group, Inc.* ......................... 12,600
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OTHER - 1.07%
700 Global Industrial Technologies, Inc.* ................. 12,512
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See accompanying notes to financial statements.
2
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THE CRUELTY FREE VALUE FUND
SCHEDULE OF INVESTMENTS - CONTINUED NOVEMBER 30, 1997
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MARKET
SHARES VALUE
------ ----------
COMMON STOCKS - CONTINUED
PRODUCER DURABLES - 9.29%
700 Burr-Brown Corp.* .................................. $ 21,175
700 Electroglas, Inc.* ................................. 13,300
700 Flowserve Corp. .................................... 18,812
1,400 Pacific Scientific Co. ............................. 22,225
700 Stewart & Stevenson Services, Inc. ................. 15,225
700 Watts Industries, Inc., Class A .................... 17,806
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108,543
----------
TECHNOLOGY - 10.03%
700 Diamond Multimedia Systems, Inc.* .................. 6,913
700 Exar Corp.* ........................................ 17,522
600 Komag, Inc.* ....................................... 12,038
700 Read-Rite Corp.* ................................... 13,388
1,400 Scientific-Atlanta, Inc. ........................... 28,000
700 Tech-Sym Corp.* .................................... 21,219
900 Western Digital Corp.* ............................. 18,169
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117,249
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TRANSPORTATION - 10.80%
600 Airborne Freight Corp. ............................. 38,213
700 Borg-Warner Automotive, Inc. ....................... 32,987
700 Fleetwood Enterprises, Inc. ........................ 24,981
1,700 Simpson Industries, Inc. ........................... 19,762
700 Walbro Corp. ....................................... 10,194
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126,137
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UTILITIES - 0.84%
700 Jones Intercable Inc., Class A* .................... 9,800
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TOTAL COMMON STOCKS (COST $875,782) ................ 945,582
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PRINCIPAL
AMOUNT SHORT-TERM INVESTMENTS - 11.49%
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$134,284 The Bank of New York Cash Reserve Fund, 4.60% ...... 134,284
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TOTAL SHORT TERM INVESTMENTS (COST $134,284) ....... 134,284
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TOTAL INVESTMENTS (COST $1,010,066) - 92.42% ....... 1,079,866
OTHER ASSETS, LESS OTHER LIABILITIES - 7.58% ....... 88,535
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NET ASSETS - 100.00% ............................... $1,168,401
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* Non-income producing security
See accompanying notes to financial statements.
3
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THE CRUELTY FREE VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1997
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ASSETS:
Investment in securities at value (Cost $1,010,066) ........... $1,079,866
Receivables:
Capital stock sold .......................................... 1,000
Due from Advisor ............................................ 44,054
Dividends and interest receivable ........................... 1,240
Deferred unamortized organization costs (Note 1) .............. 63,084
Other assets .................................................. 4,024
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TOTAL ASSETS ............................................. 1,193,268
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LIABILITIES:
Payables:
Accrued expenses ............................................ 24,634
Distribution fee (Note 3) ................................... 233
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TOTAL LIABILITIES ........................................ 24,867
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NET ASSETS:
Applicable to 41,790 shares; unlimited number of shares
of beneficial interest authorized with no par value ........... $1,168,401
==========
Net asset value, offering and redemption price
($1,168,401 (DIVIDE) 41,790 shares) ........................... $ 27.96
==========
NET ASSETS CONSIST OF:
Paid-in capital ............................................... $1,085,378
Accumulated undistributed net investment loss ................. (1,948)
Accumulated undistributed realized gains on investments ....... 15,171
Net unrealized appreciation on investments .................... 69,800
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NET ASSETS ............................................... $1,168,401
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See accompanying notes to financial statements.
4
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THE CRUELTY FREE VALUE FUND
STATEMENT OF OPERATIONS
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FOR THE PERIOD
APRIL 29, 1997*
THROUGH
NOVEMBER 30, 1997
-----------------
INVESTMENT INCOME:
Dividend .................................................. $ 3,910
Interest .................................................. 3,111
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Total investment income ................................. 7,021
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EXPENSES:
Investment advisory fees (Note 3) ......................... 5,749
Distribution expense (Note 3) ............................. 1,150
Administration fees ....................................... 32,440
Registration fees ......................................... 28,795
Transfer agent fees ....................................... 19,957
Accounting fees ........................................... 14,000
Audit fees ................................................ 10,000
Amortization of organization costs (Note 1) ............... 9,416
Custody fees .............................................. 5,270
Trustees fees ............................................. 4,000
Printing fees ............................................. 2,711
Legal fees ................................................ 2,317
Insurance ................................................. 735
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TOTAL EXPENSES .......................................... 136,540
Expenses waived and reimbursed by Advisor (Note 3) ...... (127,571)
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NET EXPENSES ............................................ 8,969
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NET INVESTMENT LOSS .......................................... (1,948)
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REALIZED AND UNREALIZED GAINS ON INVESMENTS:
Net realized gains on investments ......................... 15,171
Net change in unrealized appreciation on investments ...... 69,800
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Net realized and unrealized gains on investments .......... 84,971
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ......... $ 83,023
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*Commencement of investment operations.
See accompanying notes to financial statements.
5
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THE CRUELTY FREE VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
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FOR THE PERIOD
APRIL 29, 1997*
THROUGH
NOVEMBER 30, 1997
-----------------
OPERATIONS:
Net investment loss ....................................... $ (1,948)
Net realized gains on investments ......................... 15,171
Net change in unrealized appreciation on investments ...... 69,800
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Net increase in net assets resulting from operations ...... 83,023
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CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ............................... 992,665
Cost of shares redeemed ................................. (7,287)
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Increase in net assets derived from capital share
transactions (a) ...................................... 985,378
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TOTAL INCREASE IN NET ASSETS ......................... 1,068,401
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NET ASSETS:
Beginning of period ....................................... 100,000
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End of period (including undistributed net investment
loss of $1,948) ......................................... $1,168,401
==========
(a) Transactions in capital stock were:
Shares sold ........................................... 38,051
Shares redeemed ....................................... (261)
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Increase in shares outstanding ............................ 37,790
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*Commencement of investment operations.
See accompanying notes to financial statements.
6
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THE CRUELTY FREE VALUE FUND
FINANCIAL HIGHLIGHTS
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The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
FOR THE PERIOD
APRIL 29, 1997*
THROUGH
NOVEMBER 30, 1997
-----------------
NET ASSET VALUE, BEGINNING OF PERIOD ......................... $ 25.00
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Income from investment operations:
Net investment loss ..................................... (0.05)
Net realized and unrealized gains on investments ........ 3.01
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Total from investment operations ..................... 2.96
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NET ASSET VALUE, END OF PERIOD ............................... $ 27.96
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TOTAL RETURN ................................................. 11.84%1
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) ....................... $ 1,168
Ratio of expenses to average net assets:
Before expense reimbursement ............................ 29.69%2
After expense reimbursement ............................. 1.95%2
Ratio of net investment income to average net assets:
Before expense reimbursement ............................ (28.16%)2
After expense reimbursement ............................. (0.42%)2
Portfolio turnover rate ................................... 15.06%1
Average commission rate paid .............................. $ 0.0698
* Commencement of investment operations.
1 Not Annualized.
2 Annualized.
See accompanying notes to financial statements.
7
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THE CRUELTY FREE VALUE FUND
NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 1997
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NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Beacon Global Advisors Trust (the "Trust") is organized as a Delaware business
trust pursuant to a Trust Agreement dated August 29, 1996. The Trust is
registered under the Investment Company Act of 1940 (the "Act"), as amended, as
an open-end, diversified management investment company. The Trust is organized
to offer separate series of shares and is currently offering a single series of
shares called The Cruelty Free Value Fund (the "Fund"). The initial
capitalization of the Fund, $100,000, was provided on March 26, 1997 by Beacon
Global Advisors, Ltd., parent company of the investment advisor. The Fund
commenced investment operations on April 29, 1997. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles for investment companies.
SECURITY VALUATION. Investments in securities traded on a national securities
exchange are valued at the last reported sales price. Unlisted securities,
listed securities in which there were no sales, or securities traded
over-the-counter, are valued at the mean of the closing bid and ask prices. When
market quotations are not readily available, securities and other assets are
valued at fair value as determined in good faith by the Board of Trustees.
Short-term obligations having a maturity of 60 days or less are valued at
amortized cost, which the Board of Trustees believes represents fair value.
INVESTMENT INCOME AND SECURITIES TRANSACTIONS. Security transactions are
accounted for on the date the securities are purchased or sold (trade date).
Cost is determined and gains and losses are based on the identified cost basis
for both financial statement and federal income tax purposes. Dividend income is
reported on the ex-dividend date. Interest income and expenses are accrued
daily.
ORGANIZATION COSTS. Organization costs are being amortized on a straight line
basis over five years from commencement of operations.
FEDERAL INCOME TAXES. It is the policy of the Fund to comply with all
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no Federal income tax provision is required. Cost of
securities for tax purposes is substantially the same as for financial reporting
purposes.
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to distribute substantially all
of its net investment income and capital gains, if any, annually. Distributions
to shareholders are recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles.
USE OF ESTIMATES. In preparing financial statements in conformity with generally
accepted accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements, as well as the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
NOTE 2 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short term investments, totaled
$975,536 and $109,916, respectively, for the period ended November 30, 1997. Net
unrealized appreciation of investments at November 30, 1997 includes aggregate
unrealized appreciation of $115,697 and unrealized depreciation of $45,897.
8
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THE CRUELTY FREE VALUE FUND
NOTES TO FINANCIAL STATEMENTS - CONTINUED NOVEMBER 30, 1997
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NOTE 3 - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Beacon Global Advisors, Inc. (the "Advisor"), a registered investment advisor,
provides the Fund with investment management services. For providing investment
advisory services, the Fund pays the Advisor a monthly fee which is calculated
by applying the following annual rates: 1.25% of the average daily net assets of
the first $100 million, 1.00% of the average daily net assets from $100 million
to $500 million, and 0.75% of average daily net assets over $500 million. The
Advisor has entered into a subadvisory agreement with Zurich Investment
Management, Inc. ("ZIM") and ZIM has entered into a subadvisory agreement with
Dreman Value Advisors, Inc. ("Dreman") to assist in the selection and management
of the Fund's investment securities. For its services, ZIM receives from the
Advisor and pays Dreman, an annual fee equal to 0.50% of the first $50 million
of the Fund's average daily net assets, 0.35% of the Fund's average daily net
assets from $50 million to $100 million, and 0.25% of the Fund's average daily
net assets in excess of $100 million.
The Advisor has voluntarily agreed to waive its fees and reimburse the Fund for
the first year of operations to the extent total annualized expenses exceed
1.95% of the Fund's average daily net assets. For the period ended November 30,
1997, advisory fees of $5,749 were paid to the Advisor and the Advisor
reimbursed the Fund $127,571. Certain Officers and Trustees are affiliated
persons of the Advisor. All Officers serve without direct compensation from the
Fund. Officers, Trustees and affiliated persons of The Cruelty Free Value Fund
directly control 23,984 shares, or 57.40% of the Fund, including one shareholder
who owns 47.80%.
Excluding the investment advisory fee, other expenses incurred during the period
ended November 30, 1997 totaled $130,791, of which $66,397 represents fees
charged by FPS Services, Inc., for administration, transfer agent, accounting
and shareholder services. The Bank of New York serves as Custodian of the Fund.
The Fund has adopted a distribution plan (the "Plan"), pursuant to Rule 12b-1
under the Act which permits the Fund to pay certain expenses associated with the
distribution of its shares. The Plan provides that the Fund will reimburse
Beacon Global Advisors, Inc. (the "Distributor"), the Fund's sole underwriter
and distributor, for actual distribution and shareholder servicing expenses
incurred by the Distributor not exceeding, on an annual basis, 0.25% of the
Fund's average daily net assets. For the period ended November 30, 1997, the
Fund reimbursed the Distributor $1,150 for distribution costs incurred.
9
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THE CRUELTY FREE VALUE FUND
ILLUSTRATION OF $10,000 INVESTMENT
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The graph below compares the increase in value of a $10,000 investment in The
Cruelty Free Value Fund with the performance of the Russell 2000 Index.
Total Return for the period ending 11/30/97
Since Inception . . . . . . . . 11.84%
(not annualized)
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PLOT POINTS BELOW
The Cruelty Free Russell
Value Fund 2000 Index
4/29/97 10,000 10,000
5/31/97 10,008 11,180
7/31/97 10,940 12,170
9/30/97 11,680 13,325
11/30/97 11,184 12,623
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
10
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THE CRUELTY FREE VALUE FUND
REPORT OF INDEPENDENT ACCOUNTANTS
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The Board of Trustees
The Cruelty Free Value Fund
McLean, Virginia
We have audited the accompanying statement of assets and liabilities and
schedule of investments of The Cruelty Free Value Fund ("the Fund"), as of
November 30, 1997 and the related statement of operations, changes in net assets
and financial highlights for the period from April 29, 1997 (commencement of
operations) through November 30, 1997. These financial statements are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of November 30, 1997, by correspondence with the custodian
and brokers. 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 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
Cruelty Free Value Fund as of November 30, 1997 and the results of operations,
changes in net assets and financial highlights for the period from April 29,
1997 (commencement of operations) through November 30, 1997 in conformity with
generally accepted accounting principles.
/s/JOHNSON LAMBERT & CO.
JOHNSON LAMBERT & CO.
Bethesda, Maryland
December 12, 1997
11
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INVESTMENT ADVISOR
Beacon Global Advisors, Inc.
8260 Greensboro Drive, Suite 250
McLean, Virginia 22102-3801
DISTRIBUTOR
Beacon Global Advisors, Inc.
8260 Greensboro Drive, Suite 250
McLean, Virginia 22102-3801
SHAREHOLDER SERVICES
FPS Services, Inc.
3200 Horizon Drive
King of Prussia, Pennsylvania 19406-0903
CUSTODIAN
The Bank of New York
48 Wall Street
New York, New York 10286
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, District of Columbia 20036-1800
AUDITORS
Johnson Lambert & Co.
7500 Old Georgetown Road #700
Bethesda, Maryland 20814-6133
For Additional Information about
The Cruelty Free Value Fund call
(800) 892-9626
@http://www.crueltyfree.com
This report is submitted for general information of the shareholders of
the Fund. It is not authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an effective Prospectus
which includes details regarding the Fund's objectives, policies,
expenses and other information.
BEACON GLOBAL ADVISORS, INC
