FLEMING CAPITAL
MUTUAL FUND GROUP, INC.
FLEMING FUND
FLEMING FLEDGLING FUND
Semi-Annual Report
March 31, 1998
<PAGE>
FLEMING CAPITAL MUTUAL FUND GROUP, INC.
Dear Shareholder:
We are pleased to express our appreciation for your investment in the Fleming
Capital Mutual Fund Group, Inc. We welcome all the new investors to the Fleming
Fund and the Fleming Fledgling Fund.
This semi-annual report contains financial statements for each of the Funds from
inception on November 13, 1997 for the Fleming Fund and November 14, 1997 for
the Fledgling Fund through March 31, 1998. In addition, below is a commentary
provided by Jonathan Simon, portfolio manager for the Fleming Fund and
Christopher Jones, portfolio manager for the Fleming Fledgling Fund. We hope
that you find these comments helpful.
Fleming Fund
- ------------
As of March 31, 1998, the Fleming Fund was up 19.34% from its launch in
November. The Fund has enjoyed a double digit percentage gain in spite of its
defensive cash position of approximately 30%. Many of the stocks have performed
well so far this year, particularly the following:
Dayton Hudson +29%
Fisher Scientific +66%
Palm Harbor Homes +33%
Pulitzer Publishing +27%
Ralcorp Holdings +23%
Shopko Stores +41%
The standout performer was Fisher Scientific, which underwent a leveraged
recapitalization orchestrated by Thomas Lee and Donaldson, Lufkin and Jenrette.
Two of the three pieces of the former Whitman were sold for $25,800, leaving a
small holding of Midas at a theoretical cost below zero. The Midas position was
increased with a purchase at $15 1/2, since when the stock has risen above $20.
The disappointing areas of the portfolio have been energy, real estate and cash.
Fortunately, there has been limited loss of principal but it is difficult to
keep up with the stock market when half the engines are not firing. The Fleming
Fund continues to make opportunistic purchases of high quality companies and
expects to be essentially fully invested by the end of June.
<PAGE>
FLEMING CAPITAL MUTUAL FUND GROUP, INC.
Fleming Fledgling Fund
- ----------------------
The Fund finished the period roughly 85% invested and with a total of 58
holdings. From inception on November 14, 1997, through March 31, 1998, the Fund
was up 16.18%. Performance was favorable relative to the 9.0% increase in the
Russell 2000 index, despite the hindrance of the cash position during the
period. Over the same period the Russell 2000 Growth index increased by 10.9%.
The year 1998 began in the same vein as the fourth quarter of 1997, with small
cap growth stocks continuing to take a beating throughout most of January in
part due to concerns over Asia. This turned around meaningfully in February, as
fourth quarter numbers were reported and many of those concerns proved to be
overblown.
In general, the tone and leadership of the market appears to be turning in favor
of smaller cap growth stocks in general, with the flows of funds into aggressive
growth mutual funds also turning positive for the first time in many months. Our
priorities are focused on earnings and cash flow growth materially in excess of
the market average and, more importantly, companies where we have a high level
of confidence in meeting or exceeding Street expectations.
The Fund is now broadly invested in line with our other core small cap
portfolios, augmented by a small number of ideas from our micro-cap fund
universe. This is likely to remain the case while the Fund remains relatively
small in assets.
Thank you again for the trust and confidence you have placed in us and we look
forward to continuing to meet your investment goals.
Sincerely, Sincerely,
Jonathan Simon, Christopher Jones,
President and Portfolio Vice President and Portfolio Manager
Manager of the Fleming Fund of the Fleming Fledgling Fund
3
<PAGE>
Fleming Fund
Schedule of Investments March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 81.0% Market Value
- --------------------------------------------------------------------------------
Banks: 2.5%
1,000 PNC Bank Corp................................. $ 59,938
--------
Diversified Financial: 1.9%
1,000 SLM Holding Corp.............................. 43,625
--------
Electronics: 4.9%
1,500 Fisher Scientific International*.............. 116,250
--------
Food: 6.2%
1,000 Nabisco Holdings - Class A.................... 46,875
2,500 Ral Corp Holdings, Inc.*...................... 51,875
1,500 Richfood Holdings, Inc........................ 48,000
--------
146,750
--------
Forest Products & Paper: 1.8%
1,200 Schweitzer-Mauduit International.............. 41,400
--------
Home Builders: 1.9%
1,200 Palm Harbor Homes, Inc.*...................... 44,250
--------
Insurance: 7.2%
300 General Re Corp............................... 66,188
2,300 Medical Assurance, Inc.*...................... 66,556
700 NAC Re Corp................................... 36,706
--------
169,450
--------
Investment Management: 1.1%
1,000 Waddell & Reed Financial*..................... 26,000
--------
Lodging: 3.3%
1,000 Marriott International........................ 35,938
1,000 Marriott International, Class A............... 35,813
250 Sodexho Marriott International*............... 6,641
--------
78,392
--------
Machinery - Diversified: 1.5%
1,000 Idex Corp..................................... 36,375
--------
See Accompanying Notes To Financial Statements.
4
<PAGE>
Fleming Fund
Schedule of Investments March 31, 1998 (Unaudited), Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
Media: 7.8%
1,500 E.W. Scripps Co............................... $ 82,969
100 Washington Post Co. - Class B*................ 53,181
600 Pulitzer Publishing Co........................ 47,925
---------
184,075
---------
Medical: 4.3%
3,000 National Healthcare Corp.*.................... 101,250
---------
Oil & Gas Producers: 3.9%
1,200 Devon Energy Corp............................. 46,650
1,400 Pogo Producing Co............................. 44,450
---------
91,100
---------
Pipelines: 1.8%
800 Mapco, Inc.................................... 41,700
---------
Real Estate: 2.4%
1,600 Security Capital Group - Class B*............. 49,200
2,000 Security Capital Group - Class B - Wts 98*.... 6,625
---------
55,825
---------
REITS: 7.8%
2,500 The Price REIT Inc............................ 112,030
2,000 Kirnco Realty Corp............................ 70,750
---------
182,780
---------
Retail: 16.6%
1,200 Dayton-Hudson Corp............................ 105,600
5,000 Hancock Fabrics............................... 77,812
3,166 Midas, Inc.*.................................. 65,299
2,300 Shopko Stores, Inc.*.......................... 72,880
3,000 Viking Office Products, Inc.*................. 69,750
---------
391,341
---------
Resort: 2.2%
900 Premier Parks, Inc.*.......................... 52,200
---------
Tools: 1.9%
1,000 Snap-On, Inc.*................................ 45,625
---------
TOTAL COMMON STOCKS: 81.0%
(cost $1,658,433)............................. 1,908,326
---------
See Accompanying Notes To Financial Statements.
5
<PAGE>
Fleming Fund
Schedule of Investments March 31, 1998 (Unaudited), Continued
- --------------------------------------------------------------------------------
Principal Amount SHORT-TERM INVESTMENTS: 17.5% Market Value
- --------------------------------------------------------------------------------
$412,000 Star Bank Repurchase Agreement,
5.00%, dated 3/31/98, due 4/l/98,
collateralized by $415,000 GNMA II,
7.00%, due July 20, 2018...................... $ 412,000
---------
Total Investments
(cost $2,070,433): 98.5%...................... 2,320,326
Other Assets, Less Liabilities: 1.5%.......... 34,438
---------
NET ASSETS: 100.0% ........................... $2,354,764
==========
*Non-income producing security
See Accompanying Notes To Financial Statements.
6
<PAGE>
Fleming Fledgling Fund
Schedule of Investments March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 82.4% Market Value
- --------------------------------------------------------------------------------
Advertising: 2.9%
970 Advo, Inc.*................................... $ 26,796
250 TMP Worldwide, Inc.*.......................... 12,750
---------
39,546
---------
Apparel: 0.7%
250 Unifi, Inc.................................... 9,312
---------
Banks: 1.7%
410 Investors Financial Services*................. 22,550
---------
Chemicals: 2.5%
960 Scotts Co.*................................... 33,240
---------
Commercial Services: 15.4%
2,550 Ace Cash Express, Inc.*....................... 37,133
100 Acnielson Corp.*.............................. 10,575
940 Coinmack Laundry Corp.*....................... 23,238
1,430 Data Broadcasting Corp.*...................... 18,170
460 Envoy Corp.*.................................. 19,780
350 Interim Services, Inc.*....................... 11,812
540 Iron Mountain, Inc.*.......................... 20,250
980 Pierce Leahy Corp.*........................... 11,644
690 Pittston Brinks............................... 26,305
800 Rental Service Corp.*......................... 18,600
700 Specialty Care Network*....................... 11,334
---------
208,841
---------
Consulting Services: 0.9%
340 Superior Consulting Holdings*................. 12,197
---------
Distribution/Wholesale: 6.1%
660 Daisytek International Corp.*................. 32,175
860 Keystone Automotive Industries, Inc.*......... 20,532
810 Scansource, Inc.*............................. 17,010
340 Tech Data Corp.*.............................. 13,090
---------
82,807
---------
Electrical Components & Equipment: 1.5%
470 Vicor Corp.*.................................. 20,295
---------
See Accompanying Notes To Financial Statements.
7
<PAGE>
Fleming Fledgling Fund
Schedule of Investments March 31, 1998 (Unaudited), Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
Electronics: 6.7%
550 BMC Industries, Inc. - Minn................... $ 4,858
600 Cyberoptics Corp.*............................ 16,200
750 D I I Group, Inc.*............................ 16,125
980 Kemet Corp.*.................................. 18,190
220 Pittway Corp. - Class A....................... 15,620
585 Solectron Corp.*.............................. 20,490
--------
91,483
--------
Entertainment: 0.9%
440 Panavision, Inc.*............................. 11,578
--------
Hand/Machine Tools: 1.4%
500 Applied Power, Inc. - Class A................. 19,250
--------
Health Care: 4.9%
1,150 Hanger Orthopedic Group*...................... 19,333
500 National Healthcare Corp.*.................... 16,875
810 Physician Sales & Service*.................... 19,035
1,230 Staar Surgical Co.*........................... 11,430
--------
66,673
--------
Insurance: 2.1%
870 Allied Group, Inc............................. 28,058
--------
Leisure Time: 1.4%
850 American Classic Voyages*..................... 19,550
--------
Media: 4.1%
1,290 Jones Intercable, Inc. - A*................... 23,542
740 United Video Satellite*....................... 31,450
--------
54,992
--------
Miscellaneous Manufacturing: 0.7%
340 Roper Industries, Inc......................... 10,094
--------
Oil & Gas Producers: 5.3%
1,415 Newfield Exploration Co.*..................... 36,878
1,650 Vintage Petroleum, Inc........................ 34,650
--------
71,528
--------
See Accompanying Notes To Financial Statements.
8
<PAGE>
Fleming Fledgling Fund
Schedule of Investments March 31, 1998 (Unaudited), Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
Retail: 3.8%
800 Regis Corp.................................... $ 24,000
348 Sonic Corp.*.................................. 11,685
660 Viking Office Products*....................... 15,345
---------
51,030
---------
REITS: 2.7%
480 Kimco Realty Corp............................. 16,980
790 SL Green Realty Corp.......................... 20,194
---------
37,174
---------
Rental Equipment: 1.8%
640 Cole National Corp.*.......................... 24,720
---------
Semiconductors: 1.3%
460 Xilinx Inc.*.................................. 17,221
---------
Software: 7.6%
850 Acxiom Corp.*................................. 21,780
510 Advent Software, Inc.*........................ 24,225
410 CSG Systems Int'l, Inc.*...................... 18,552
1,250 Integrated Systems, Inc.*..................... 26,952
600 Pegasystems, Inc.*............................ 10,950
---------
102,459
---------
Transportation: 6.1%
720 Air Express International..................... 19,111
1,160 American Freightways Corp.*................... 12,760
630 Heartland Express, Inc.*...................... 17,482
1,000 Landair Services, Inc.*....................... 33,000
---------
82,353
---------
TOTAL COMMON STOCKS: 82.4%
(cost $974,290)............................... 1,116,951
---------
Principal Amount SHORT-TERM INVESTMENTS: 15.6%
- ---------------- -----------------------------
$211,000 Star Bank Repurchase Agreement,
5.00%, dated 3/31/98, due 4/l/98,
collateralized by $212,000 GNMA II,
7.00%, due July 20, 2018...................... 211,000
---------
See Accompanying Notes To Financial Statements.
9
<PAGE>
Fleming Fledgling Fund
Schedule of Investments March 31, 1998 (Unaudited), Continued
- --------------------------------------------------------------------------------
Market Value
- --------------------------------------------------------------------------------
Total Investments
(cost $1,185,290): 98.0%...................... $1,327,951
Other Assets, less Liabilities: 2.0%.......... 27,427
----------
NET ASSETS: 100.0% ........................... $1,355,378
==========
*Non-income producing security
See Accompanying Notes To Financial Statements.
10
<PAGE>
FLEMING CAPITAL MUTUAL FUND GROUP, INC.
STATEMENTS OF ASSETS AND LIABILITIES March 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Fleming Fleming Fledgling
Fund Fund
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in securities at market value
(cost of $2,070,433 and $1,185,290,
respectively)............................................. $1,908,326 $1,116,951
Repurchase Agreements (cost of $412,000 and
$211,000, respectively)................................... 412,000 211,000
Cash......................................................... 103,632 726
Receivables:
Dividends and interest ................................... 1,745 596
Investment securities sold................................ 64,383 7,998
From Adviser (Note 3)..................................... 27,761 26,405
Deferred organization costs, net............................. 47,607 47,657
Other assets ................................................ 2,448 1,367
---------- ----------
Total assets........................................... 2,567,902 1,412,700
---------- ----------
LIABILITIES
Payable for investment securities purchased.................. 188,208 33,872
Other accrued expenses....................................... 24,930 23,450
---------- ----------
Total liabilities...................................... 213,138 57,322
---------- ----------
NET ASSETS .................................................. $2,354,764 $1,355,378
========== ==========
COMPOSITION OF NET ASSETS
Paid-in capital.............................................. $2,048,457 $1,177,064
Undistributed net investment income.......................... 5,319 (408)
Undistributed net realized gain on investments............... 51,094 36,061
Net unrealized appreciation on investments................... 249,894 142,661
---------- ----------
Net assets............................................. $2,354,764 $1,355,378
========== ==========
Number of shares issued and outstanding
(100,000,000 shares authorized, $.001
par value, per Fund)...................................... 197,884 116,800
========== ==========
Net asset value per share................................. $ 11.90 $ 11.60
========== ==========
</TABLE>
See Accompanying Notes To Financial Statements.
11
<PAGE>
FLEMING CAPITAL MUTUAL FUND GROUP, INC.
STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Fleming Fleming Fledgling
Fund Fund
- ---------------------------------------------------------------------------------------------------
November November
13, 1997* to 14, 1997* to
March 31, 1998 March 31, 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest income...................................... $ 8,657 $ 5,350
Dividend income...................................... 7,808 1,338
--------- ---------
Total income...................................... 16,465 6,688
Expenses:
Administration fees ................................. 15,343 15,123
Fund accounting fees................................. 7,671 7,561
Audit fees........................................... 6,622 6,527
Transfer agent fees.................................. 5,562 5,483
Advisory fees........................................ 5,407 4,125
Legal fees........................................... 3,836 3,781
Amortization of deferred organization costs.......... 3,416 3,367
Directors fees....................................... 3,164 3,119
Insurance............................................ 2,685 2,647
Custodian fees....................................... 2,244 2,212
Miscellaneous expenses............................... 1,918 1,891
Reports to shareholders.............................. 1,151 1,134
Registration fees.................................... 921 909
--------- ---------
Total expenses.................................... 59,940 57,879
Expenses reimbursed/waived........................ (52,426) (52,391)
--------- ---------
Net expenses...................................... 7,514 5,488
--------- ---------
Net investment income .................................. 8,951 1,200
--------- ---------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments........................ 51,094 36,061
Net change in unrealized appreciation
on investments....................................... 249,894 142,661
--------- ---------
Net gain on investments................................. 300,988 178,722
--------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ..................................... $ 309,939 $ 179,922
========= =========
</TABLE>
*Commencement of Operations
See Accompanying Notes To Financial Statements.
12
<PAGE>
FLEMING CAPITAL MUTUAL FUND GROUP, INC.
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Fleming Fleming Fledgling
Fund Fund
- ------------------------------------------------------------------------------------------------
November November
13, 1997* to 14, 1997* to
March 31, 1998 March 31, 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income............................... $ 8,951 $ 1,200
Net realized gain on investments ................... 51,094 36,061
Net change in unrealized appreciation on
investments...................................... 249,894 142,661
---------- ----------
Net increase in net assets resulting from
operations....................................... 309,939 179,922
---------- ----------
Distributions to shareholders:
From net investment income.......................... (3,632) (1,608)
From net realized gain on investments
transactions..................................... - -
---------- ----------
Total distributions................................. (3,632) (1,608)
---------- ----------
Capital share transactions:
Proceeds from shares sold........................... 1,944,825 1,075,456
Net asset value of shares issued on reinvestment
of distributions................................. 3,632 1,608
Cost of shares redeemed............................. - -
---------- ----------
Net increase from capital share transactions........... 1,948,457 1,077,064
---------- ----------
Net increase in net assets ............................ 2,254,764 1,255,378
NET ASSETS
Beginning of period.................................... 100,000 100,000
End of period (including undistributed net
investment income of $5,319 and ($408),
respectively)....................................... $2,354,764 $1,355,378
========== ==========
CHANGE IN SHARES
Shares sold............................................ 187,537 106,642
Shares issued on reinvestment of distributions......... 347 158
Shares Redeemed........................................ 0 0
---------- ----------
Net increase .......................................... 187,884 106,800
========== ==========
</TABLE>
*Commencement of Operations
See Accompanying Notes To Financial Statements.
13
<PAGE>
FLEMING CAPITAL MUTUAL FUND GROUP, INC.
FINANCIAL HIGHLIGHTS (Unaudited)
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Semi-Annual Report.
<TABLE>
<CAPTION>
Fleming Fleming Fledgling
Fund Fund
- ------------------------------------------------------------------------------------------------------
November November
13, 1997* to 14, 1997* to
March 31, 1998 March 31, 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period .......................... $10.00 $10.00
------ ------
Income from Investment Operations
Net Investment Income.......................................... 0.08 0.03
Net Realized and Unrealized gains on Investments............... 1.85 1.59
------ ------
Total from Investment Operations............................... 1.93 1.62
------ ------
Less Distributions:
Dividends from Net Investment Income#.......................... (0.03) (0.02)
------ ------
Net Asset Value, End of Period ................................ $11.90 $11.60
====== ======
Total Return+.................................................. 19.34% 16.18%
Net Assets at End of Period (000's)............................ $2,355 $1,355
Ratio of Expenses to Average Net Assets
Before Expense Reimbursement++................................. 9.83% 13.80%
After Expense Reimbursement++.................................. 1.25% 1.35%
Ratio of Net Investment Income to Average
Net Assets (Net of Expense Reimbursement)++................. 1.47% 0.29%
Portfolio Turnover Rate+....................................... 32.01% 35.20%
Average Commission Rate Paid(1)................................ $0.0685 $0.0566
</TABLE>
*Commencement of operations
#Net investment income per share has been computed before adjustments for
book/tax differences
+Not annualized
++Annualized
(1)The Funds are required to disclose the average commission rate paid per share
of common stock investments purchased or sold.
See Accompanying Notes To Financial Statements.
14
<PAGE>
FLEMING CAPITAL MUTUAL FUND GROUP, INC.
Notes to Financial Statements at March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
1. Organization
The Fleming Capital Mutual Fund Group, Inc., (the "Group"), was organized as a
Maryland corporation on August 19, 1997 and is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. The Group consist of two separate series: the Fleming Fund
and the Fleming Fledgling Fund (each a "Fund" and collectively the "Funds").
Robert Fleming, Inc. (the "Adviser") serves as the investment adviser to the
Funds and purchased 10,000 shares of each Fund on September 26, 1997 to
capitalize Funds. Investment operations began on November 13, 1997 for the
Fleming Fund and November 14, 1997 for the Fleming Fledgling Fund.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Group in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles
("GAAP"). The presentation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates and assumptions.
A. Investment Valuation. Securities which are traded on a recognized
stock exchange are valued at the last sale price on the securities
exchange on which such securities are traded. Short-term investments
with maturities of sixty days or less are valued at amortized cost.
Securities and other assets for which market prices are not readily
available are valued at fair value as determined in good faith in
accordance with procedures approved by the Board.
B. Repurchase Agreements. The Fund's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The
underlying collateral is valued daily on a mark-to market basis to
ensure that the value, including accrued interest, is at least equal
to the repurchase price. In the event of default of the obligation
to repurchase, each Fund has the right to liquidate the collateral
and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, 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.
C. Organization Costs. Costs incurred by the Funds in connection with
their organization, registration and the initial public offering of
shares have been deferred and will be amortized over 5 years. If any
of the
15
<PAGE>
FLEMING CAPITAL MUTUAL FUND GROUP, INC.
Notes to Financial Statements (Unaudited), Continued
- --------------------------------------------------------------------------------
original shares of the Funds are redeemed by any holder thereof
prior to the end of the amortization period, the redemption proceeds
will be reduced by the pro rata share of the unamortized expenses as
of the date of redemption. The pro rata share by which the proceeds
are reduced will be derived by dividing the number of original
shares outstanding at the time of redemption.
D. Federal Income and Excise Taxes. The Funds intend to meet the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all investment
company net taxable income and net capital gains to shareholders in
a manner which results in no tax cost to the Fund. Therefore, no
federal income or excise tax provision is required.
E. Distributions to Shareholders. Dividends from net investment income
will be declared and paid annually. Distributions of net realized
gains, if any, will be declared at least annually. Distributions to
shareholders are recorded on the ex-dividend date. The Funds
periodically make reclassifications among certain of its capital
accounts as a result of the recognition and characterization of
certain income and capital gain distributions determined annually in
accordance with federal tax regulations which may differ from
generally accepted accounting principles.
F. Investment Transactions and Investment Income. Investment
transactions are accounted for on trade date. The Funds determine
the gain or loss realized from investment transactions. Dividend
income is recognized on the ex-dividend date and interest income is
recognized on an accrual basis. Discounts are accredited and
premiums are amortized as adjustments to interest income and the
identified costs of investments.
3. Investment Adviser and Other Transactions with Affiliates
The Group has an Investment Advisory Agreement with the Adviser to furnish
investment advisory services to the Funds. Under the terms of this agreement,
the Funds pay the Adviser equal to the following annual percentage of average
daily net assets:
Fleming Fund 0.90%
Fledgling Fund 1.00%
The Adviser has agreed to voluntarily reduce fees for expenses (exclusive of
brokerage, interest, taxes and extraordinary expenses) that exceed the expense
limitation of 1.25% for the Fleming Fund and 1.35% for the Fleming Fledgling
16
<PAGE>
FLEMING CAPITAL MUTUAL FUND GROUP, INC.
Notes to Financial Statements (Unaudited), Continued
- --------------------------------------------------------------------------------
Fund of average daily net assets. For the Fleming Fund, during the period from
November 13, 1997 (inception) to March 31, 1998, the Adviser reimbursed and
waived $52,426 of expenses. For the Fleming Fledgling Fund, during the period
from November 14, 1997 (inception) to March 31, 1998, the Adviser reimbursed and
waived $52,391 of expenses. The Investment Advisory Agreement permits the
Adviser to seek reimbursement of any reductions made to its advisory fees and
payments made to limit expenses which are the responsibility of the Fund's
within the three-year period following such reduction, subject to the Fund's
ability to effect such reimbursement and remain in compliance with applicable
expense limitations.
Investment Company Administration Corporation is the Administrator to the Funds
pursuant to an Administration Agreement. Each Fund will pay the Administrator an
annual fee equal to 0.10% of the first $200 million of average daily net assets,
0.05% of the next $300 million, and 0.03% of assets over $500 million, payable
monthly and subject to a minimum annual fee of $40,000 per fund.
First Fund Distributors, Inc. serves as the Distributor to the Funds pursuant to
a Distribution Agreement. The Distributor receives no fee for its distribution
services.
Each independent Director is compensated by the Group at an annual rate of
$5,000 plus related travel expenses.
Certain officers of the Adviser, Administrator and Distributor are also officers
and/or Directors of the Funds.
4. Investment Transactions
The aggregate purchases and sales of securities, excluding short-term
investments, for the Funds are summarized below:
Fleming
Fleming Fund Fledgling Fund
------------ --------------
November 13, 1997 November 14, 1997
to March 31, 1998 to March 31, 1998
Purchases $1,971,785 $1,083,843
Sales $ 364,446 $ 145,613
At March 31, 1998, the Fleming Fund and the Fleming Fledgling Fund had gross
unrealized appreciation and depreciation of investments, based on cost for the
federal income tax purposes of $2,070,433 and $1,185,290, respectively, as
follows:
Fleming Fund Fledgling Fund
------------ --------------
Gross appreciation $252,856 $163,965
Gross depreciation (2,962) (21,304)
-------- --------
Net appreciation on investments $249,894 $142,661
======== ========
17
<PAGE>
Corporation:
FLEMING CAPITAL MUTUAL FUND GROUP, INC.
Funds:
FLEMING FUND
FLEMING FLEDGLING FUND
Adviser:
ROBERT FLEMING, INC.
Distributor:
FIRST FUND DISTRIBUTORS, INC.
Administrator:
INVESTMENT COMPANY ADMINISTRATION CORPORATION
Legal Counsel:
MORGAN, LEWIS & BOCKIUS LLP
Independent Auditors:
ERNST & YOUNG LLP
