FLEMING MUTUAL FUND GROUP, INC.
SEMI-ANNUAL REPORT
For the Six Months Ended
March 31, 2000
----------
FLEMINGS
----------
<PAGE>
FLEMING MUTUAL FUND GROUP, INC.
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Shareholder Letter and Comments from Investment Adviser
Fleming Mid Cap Value Fund........................................... 1
Fleming Small Cap Growth Fund........................................ 4
Schedules of Investments
Fleming Mid Cap Value Fund........................................... 8
Fleming Small Cap Growth Fund........................................ 12
Statements of Assets and Liabilities...................................... 17
Statements of Operations.................................................. 19
Statements of Changes in Net Assets....................................... 20
Financial Highlights...................................................... 22
Notes To Financial Statements............................................. 24
<PAGE>
FLEMING MID CAP VALUE FUND
Semi-Annual report dated March 31, 2000
--------------------------------------------------------------------------------
Dear Shareholder,
For the first twenty-three weeks of the half-year under review the "new economy"
stocks reigned supreme. It was a grim period for the Fund, but finally patience
was rewarded during the final three weeks of March as a dramatic reversal
brought a dose of reality to the stock market. Amid ever increasing volatility
the same underlying trend has continued into April. The last minute rebound of
the "old economy" stocks allowed the Fund to generate a 8.97% return for the six
month period to March 31, 2000, still well below that of the S&P 500 but
respectable against most value benchmarks.
It is hard to describe the euphoria gripping the technology sector until as
recently as early March. While nobody would question the indispensable role of
information and communication technology in both the corporate and consumer
worlds, the valuation being accorded to the sector as a whole served both to
increase the risk and lower the reward of investing therein. Cisco Systems,
which has assumed the bellwether role vacated by Microsoft, was approaching a PE
ratio of 200! None of this would have troubled me so much if it hadn't been for
the liquidity drain from other sectors in order to fund fresh technology
purchases. In retrospect I should have been rejoicing in the opportunity to
invest in high quality financial and real estate companies at less than ten
times earnings.
By sticking to its knitting during the period the Fund emerged in the new Lipper
classification as a mid-cap value fund. The value part of this description is
clearly by design, while the mid-cap element is largely a result of the wealth
of investment opportunities among medium sized companies. In recognition of
these traits the Fleming Fund was renamed the Fleming Mid Cap Value Fund in
February.
Several positions were eliminated during the period, including profitable
investments in Cox Radio, Lamar Advertising, American Express, Tivo, Legg Mason
and Target Stores. As their valuations rose and concerns about rising interest
rates mounted, it seemed prudent to increase the emphasis on less economically
sensitive areas. As a result the weightings in utilities, consumer staples and
healthcare all rose over the period. It may seem a bit far-fetched, but one
possible scenario is that a less buoyant NASDAQ will damage consumer confidence
enough to cause a slowdown or even a recession. In such an environment the best
investments could be found in stocks with bond-like characteristics, which often
combine the benefits of predictable cash flow and modest growth. Even if this
scenario is wide of the mark it is still easy to make a case for the likes of
Baxter International in healthcare, Nabisco in the food sector, NStar among
electric utilities, or Kimco Realty. With regard to the latter it is worth
noting that the real estate exposure of the Fund has been reduced but still
makes up over 5% of the assets. REITs with long leases to credit worthy tenants
1
<PAGE>
at below market rents offer a degree of protection against a weakening economy
combined with growth potential and a high current yield. Kimco Realty has always
fit the bill in this regard. Public Storage is in the more questionable
self-storage sector, but its dominant position in major markets and a
forward-thinking management make it equally intriguing as an investment.
As always there have been several disappointing stock movements of late, but
most of them have been caused by the natural ebb and flow of investor sentiment.
One glaring exception is IMS Health. In spite of having an outstanding business
as a dominant supplier of prescription drug sales data to pharmaceutical
companies, the management of IMS chose to merge with an unseasoned internet
start-up called Trizetto, with a subsequent plan to split up into three separate
units. The deal was too complex and way too dilutive for the market's
comprehension. At the current price of $17 the shares of IMS Health are worth
retaining in the hope that shareholders will block the deal, but the episode has
been a useful reminder that the three ingredients for a good investment are a
good business, a strong management and a fair stock valuation. In this case one
of the three was missing.
As you may know Robert Fleming Holdings, the parent company of the adviser, has
agreed to be acquired by Chase Manhattan. For the time being there are no
changes planned for the Fund, but we will be reviewing various options in regard
to the mutual fund ranges within Chase.
As the Fleming Mid Cap Value Fund approaches its third birthday it is pleasing
to report that the average annual total return since inception (November 13,
1997) through March 31, 2000 was just over 19%. While this was achieved in a
roaring bull market it was also a challenging environment for our particular
breed of value investing. It is my hope that the past six weeks will turn out to
have been prologue for the future complexion of the stock market.
Sincerely,
Jonathan Simon
President and Portfolio Manager of the Fleming Mid Cap Value Fund
2
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Fleming Mid Cap Value Fund
Value of $10,000 vs S&P/BARRA Mid Cap 400 Value and Russell Midcap Value Indices
Average Annual Total Return
Period Ended March 31, 2000
Since Inception* One Year
---------------- --------
19.01% 22.64%
Fleming Mid S&P/Barra Mid Russell Mid
Cap Value Cap 400 Value Cap Value
--------- ------------- ---------
11/13/97 10,000 10,000 10,000
11/30/97 10,200 10,108 10,337
12/31/97 10,490 10,714 10,733
1/31/98 10,570 10,469 10,525
2/28/98 11,072 11,244 11,228
3/31/98 11,934 11,770 11,806
4/30/98 11,994 11,845 11,740
5/31/98 11,854 11,367 11,465
6/30/98 11,974 11,283 11,502
7/31/98 11,363 10,792 10,919
8/31/98 10,169 9,024 9,384
9/30/98 10,650 9,726 9,932
10/31/98 11,413 10,494 10,575
11/30/98 12,125 10,738 10,946
12/31/98 12,564 11,217 11,279
1/31/99 12,331 10,630 11,016
2/28/99 12,281 10,123 10,774
3/31/99 12,341 10,314 10,928
4/30/99 13,342 11,312 11,963
5/31/99 14,090 11,496 12,013
6/30/99 14,555 11,854 12,150
7/31/99 14,872 11,696 11,846
8/31/99 14,145 11,253 11,436
9/30/99 13,889 10,699 10,858
10/31/99 14,391 10,914 11,178
11/30/99 14,333 11,134 10,973
12/31/99 14,306 11,479 11,268
1/31/00 14,017 10,983 10,594
2/29/00 13,148 10,580 10,151
3/31/00 15,135 12,199 11,381
Past performance is not predictive of future performance.
The S&P/BARRA Mid Cap 400 Value Index is an unmanaged, capitalization weighted,
price only index of 400 stocks that measure the performance of the mid-sized
company segment of the U.S. market. The S&P/BARRA Mid Cap 400 Value Index is a
subset of the Mid Cap 400 Index, which contains companies with lower
price-to-book ratios. The Russell Midcap(TM) Value Index is an unmanaged,
capitalization weighted, price only index that measures the performance of those
companies included in the Russell Midcap Index that have lower price-to-book
ratios and lower forcasted growth rates.
* Inception - November 13, 1997.
3
<PAGE>
FLEMING SMALL CAP GROWTH FUND
Semi-Annual report dated March 31, 2000
--------------------------------------------------------------------------------
Dear Shareholder,
The six months to March 31, 2000 were by any standards an extraordinary period
in stockmarket history. Driven by the technology stocks almost exclusively, and
latterly biotechnology, small companies performed strongly in the lead up to the
millennium. This momentum driven environment reached a crescendo in January and
February, ultimately precipitating a violent snap-back in March at which point
value stocks, large stocks and cyclical sectors outperformed strongly. Although
a number of triggering events could be cited, truthfully this was a market
environment screaming for a correction. In spite of the pullback, technology,
biotechnology and growth completely dominated the half year under review.
To fully appreciate the extraordinary volatility in the period, it may be
instructive to review the progress of a few influential stocks over the past
three months. Although the indices peaked in early March, the small cap universe
reached the point of greatest concentration in mid February, when twelve stocks
(out of 2,000, to emphasize the obvious) alone accounted for 50% of the Russell
2000's year-to-date performance, and twenty four stocks accounted for 75%. Of
the top twelve, half were technology companies and half were biotechnology. Only
four were expected to be profitable in 2000, carrying an average PE of 283. The
biggest contributor was Microstrategy, which began the year at $105, peaked at
$333 (a market capitalization of $25 billion), closed the quarter at $87 and is
now around $35. An earnings restatement did not help in this case. Human Genome
Sciences began at $76, ended at $83, having peaked at $232. Millennium
Pharmaceuticals went from $122 to $132, with an intermediate peak of $316.
Such price swings are clearly the product of an intensely speculative
environment. In the Internet arena, in a very short space of time, the warmth of
the market's reception is already cooling in certain areas. There is definitely
a less generous acceptance of questionable business models. The
Business-to-Consumer subsegment has cooled and Business-to-Business, the
market's focus in the first quarter of 2000, is also losing momentum. The
infrastructure area continues to look promising, as so many Old Economy
companies rush to catch up with the new technology, although many of the market
leaders seem very fully priced. It is symptomatic of an extended bullmarket that
a "Business-to-Government" category is being positioned on the launch pad.
For the six months the fund outperformed its benchmark but underperformed the
Russell 2000 Growth, although the magnitude of that underperformance contracted
sharply as the froth in the market subsided, and has further improved in the
first three weeks of April.
4
<PAGE>
Six Months to March 31, 2000
----------------------------
* Fleming Small Cap Growth Fund +29.3%
* Russell 2000 +26.8%
* Russell 2000 Growth +45.8%
* Russell 2000 Value +5.4%
* S&P 500 +17.5%
Fleming Small Cap Growth Fund returns are on an NAV-NAV basis and are net of
fees. Benchmark returns are on a total return basis. Source: Fleming Asset
Management USA; Frank Russell Company; BARRA. The Russell 2000(R) Value Index
measures the performance of those Russell 2000 companies with lower
price-to-book ratios and lower forecasted growth values. The S&P 500 Index is an
unmanaged index composed of 500 widely held common stocks listed on the New York
Stock Exchange, American Stock Exchange and over-the-counter market. Past
performance is not necessarily indicative of future results.
SECTOR PERFORMANCE - FLEMING SMALL CAP GROWTH FUND VS. RUSSELL 2000
<TABLE>
<CAPTION>
Auto./ Cons. Mat./ Prod. Cons.
Tech. Energy Trans. Financials Disc. Proc. Utilities Durab. Other Stap. Healthc.
----- ------ ------ ---------- ----- ----- --------- ------ ----- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FLMSX 178% 41% 35% 23% 18% 15% 12% 12% 0% 2% -53%
Russell 2000 100% 27% -2% -3% -12% 3% 25% 53% -5% 0% 39%
</TABLE>
Source: Fleming Asset Management USA; Prudential Securities. Figures are from
September 30, 1999 through March 31, 2000.
Past performance is not necessarily indicative of future results.
5
<PAGE>
SECTOR WEIGHTS - FLEMING SMALL CAP GROWTH FUND VS. RUSSELL 2000
<TABLE>
<CAPTION>
Cons. Mat./ Prod. Auto./ Cons.
Disc. Tech. Financials Healthc. Energy Proc. Durab. Trans. Utilities Stap. Other Cash
----- ----- ---------- -------- ------ ----- ------ ------ --------- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FLMSX 34% 19% 18% 7% 6% 5% 5% 5% 0% 0% 0% 2%
Russell 2000 15% 27% 16% 11% 4% 7% 10% 3% 6% 2% 1% 0%
</TABLE>
Source: Fleming Asset Management USA; Prudential Securities. Figures as of March
31, 2000.
Past performance is not necessarily indicative of future results.
OUTLOOK
Expect a further period of volatility as the market searches for renewed
leadership, and the Fed continues to try to brake the economy. Resumed upward
progress will be impeded somewhat by new equity supply; not just the torrent of
new issues, but more significantly the release from lock-up of insider stock
from last year's offerings. Many areas of the technology sector are enjoying an
extremely benign business environment, but this was very heavily discounted by
the market and valuations are in many cases far from compelling. We believe a
sharp correction in the emerging areas of healthcare presents interesting
opportunities.
Although neglected value stocks reached bargain-basement levels, the growth
sectors of the market will continue to be our long-term focus. The correction,
if it is allowed to develop before rebounding, should reduce some of the extreme
valuation risk that has concerned us.
Sincerely,
Christopher M.V. Jones
Vice President and Portfolio Manager of the Fleming Small Cap Growth Fund
6
<PAGE>
Fleming Small Cap Growth Fund
Value of $10,000 vs Russell 2000 and Russell 2000 Growth Indices
Average Annual Total Return
Period Ended March 31, 2000
Since Inception* One Year
---------------- --------
27.98% 55.83%
Fleming Small Cap
Growth Fund Russell 2000 Russell 2000 Growth
----------- ------------ -------------------
11/14/97 10,000 10,000 10,000
11/30/97 9,970 9,935 9,762
12/31/97 10,206 10,109 9,768
1/31/98 10,386 9,949 9,638
2/28/98 10,927 10,685 10,489
3/31/98 11,618 11,126 10,928
4/30/98 11,748 11,187 10,995
5/31/98 11,298 10,584 10,196
6/30/98 11,608 10,606 10,300
7/31/98 10,777 9,747 9,440
8/31/98 8,664 7,854 7,261
9/30/98 9,485 8,469 7,997
10/31/98 10,066 8,815 8,415
11/30/98 10,647 9,277 9,068
12/31/98 11,722 9,851 9,888
1/31/99 11,967 9,982 10,333
2/28/99 10,927 9,173 9,388
3/31/99 11,538 9,316 9,722
4/30/99 12,733 10,151 10,581
5/31/99 13,233 10,299 10,597
6/30/99 13,730 10,765 11,156
7/31/99 14,464 10,470 10,811
8/31/99 13,637 10,082 10,407
9/30/99 13,906 10,084 10,608
10/31/99 14,288 10,125 10,879
11/30/99 15,335 10,729 12,029
12/31/99 17,178 11,944 14,150
1/31/00 16,049 11,752 14,018
2/29/00 17,065 13,692 17,281
3/31/00 17,980 12,789 15,464
Past performance is not predictive of future performance.
The Russell 2000(R) Index is an unmanaged, capitalization weighted price only
index which is comprised of 2000 of the smallest stocks (on the basis of
capitalization) in the Russell 3000(R) Index. The Russell 2000(R) Growth Index
measures the performance of those Russell 2000 companies with higher
price-to-book ratios and higher forcasted growth rates.
* Inception - November 14, 1997.
7
<PAGE>
FLEMING MID CAP VALUE FUND
SCHEDULE OF INVESTMENTS AT MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Shares COMMON STOCKS: 95.30% Value
--------------------------------------------------------------------------------
BANKS: 7.99%
2,200 Cullen/Frost Bankers, Inc. $ 58,163
285 M & T Bank Corp. 127,253
800 State Street Corp. 77,500
2,000 Wells Fargo & Company 81,875
----------
344,791
----------
BEVERAGES: 3.96%
3,300 Brown-Forman Corp. - Class A 170,771
----------
BUILDING RELATED: 4.80%
12,000 Clayton Homes, Inc. 121,500
1,800 Martin Marietta Materials, Inc. 85,500
----------
207,000
----------
COMMERCIAL SERVICES: 1.33%
2,000 Dun & Bradstreet Corp. 57,250
----------
FINANCE: 4.25%
1,600 Fannie Mae 90,300
2,800 SLM Holding Corp. 93,275
----------
183,575
----------
FOOD: 6.91%
4,500 Interstate Bakeries 64,125
3,700 Nabisco Holdings Corp. - Class A 119,094
4,200 Ralston-Ralston Purina Group 114,975
----------
298,194
----------
8
<PAGE>
FLEMING MID CAP VALUE FUND
SCHEDULE OF INVESTMENTS AT MARCH 31, 2000 (UNAUDITED) - (CONTINUED)
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
GAS & ELECTRIC UTILITIES: 8.07%
4,000 NSTAR* $ 168,000
4,100 Williams Cos, Inc.* 180,144
----------
348,144
----------
HEALTH CARE: 15.51%
1,450 Bausch & Lomb, Inc. 75,672
1,950 Baxter International, Inc. 122,241
1,500 Biomet, Inc. 54,563
3,500 Carlisle Companies, Inc. 140,000
3,000 First Health Group Corp.* 94,875
3,800 IMS Health Care, Inc. 64,363
3,300 Trigon Healthcare, Inc.* 117,975
----------
669,689
----------
INSURANCE: 8.52%
1,300 Marsh & McLennan Companies, Inc. 143,406
2,100 Nationwide Financial Services, Inc. - Class A 61,425
2,300 Partner RE, Ltd. 84,669
1,413 XL Capital, Ltd. 78,245
----------
367,745
----------
INVESTMENT MANAGEMENT: 2.61%
2,887 Waddell & Reed Financial, Inc. - Class B 112,593
----------
LODGING: 2.46%
3,375 Marriott International, Inc. - Class A 106,313
----------
9
<PAGE>
FLEMING MID CAP VALUE FUND
SCHEDULE OF INVESTMENTS AT MARCH 31, 2000 (UNAUDITED) - (CONTINUED)
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
MEDIA: 10.08%
550 Clear Channel Commumications, Inc.* $ 37,984
2,350 E.W. Scripps Co. 113,975
950 Gannett Co. 66,856
400 Washington Post Co. - Class B 216,400
----------
435,215
----------
OILS & GAS PRODUCERS: 4.16%
3,700 Devon Energy Corp.* 179,681
----------
REAL ESTATE: 2.34%
7,000 Security Capital Group, Inc. - Class B* 101,063
----------
REAL ESTATE INVESTMENT TRUSTS: 2.99%
1,700 Kimco Realty Corp. 63,750
3,120 Public Storage, Inc. 65,520
----------
129,270
----------
RETAIL: 7.13%
6,500 Blockbuster, Inc. - Class A 65,000
1,900 Circuit City Stores, Inc. 115,663
2,450 Payless Shoesource, Inc.* 127,247
----------
307,910
----------
TRANSPORTATION: 2.19%
1,100 Kansas City Southern Industries, Inc. 94,531
----------
TOTAL COMMON STOCKS
(cost $3,861,349) 4,113,735
----------
10
<PAGE>
FLEMING MID CAP VALUE FUND
SCHEDULE OF INVESTMENTS AT MARCH 31, 2000 (UNAUDITED) - (CONTINUED)
--------------------------------------------------------------------------------
Principal
Amount SHORT-TERM INVESTMENT: 3.77% Value
--------------------------------------------------------------------------------
MONEY MARKET INVESTMENT: 3.77%
$162,895 Firstar Stellar Treasury Fund (cost $162,895) $ 162,895
----------
TOTAL INVESTMENTS: 99.07%
(cost $4,024,244) 4,276,630
Other Assets less Liablities: 0.93% 39,848
----------
NET ASSETS: 100.00% $4,316,478
==========
* Non-income producing security.
See accompanying Notes to Financial Statements.
11
<PAGE>
FLEMING SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS AT MARCH 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Shares COMMON STOCKS: 97.27% Value
--------------------------------------------------------------------------------
ADVERTISING: 0.93%
1,275 Advo, Inc.* $ 31,875
----------
AUTO PARTS: 1.22%
3,980 Jason, Inc.* 41,790
----------
BANKS: 5.47%
1,250 Imperial Bancorp* 38,750
700 Investors Financial Services Corp. 41,213
145 M & T Bank Corp. 64,743
1,655 Texas Regional Bancshares, Inc. 42,099
----------
186,805
----------
BIOMEDICAL: 3.31%
140 Abgenix, Inc.* 19,338
850 Aclara Biosciences, Inc.* 33,522
1,425 Genzyme Transgenics Corp.* 28,500
125 Myriad Genetics, Inc.* 7,531
25 Sequenom, Inc.* 984
500 Vertex Pharmaceuticals, Inc.* 23,406
----------
113,281
----------
COMMERCIAL SERVICES: 16.98%
4,280 Ace Cash Express, Inc.* 73,295
3,230 Acnielson Corp.* 72,675
1,080 Aurora Biosciences Corp.* 44,145
435 Coinmach Laundry Corp.* 4,323
410 Critical Path, Inc.* 34,850
3,244 Hollywood.com, Inc.* 50,688
1,995 Interim Services, Inc.* 37,032
1,035 Iron Mountain, Inc.* 35,255
12
<PAGE>
FLEMING SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS AT MARCH 31, 2000 (UNAUDITED) - (CONTINUED)
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
COMMERCIAL SERVICES: - (CONTINUED)
3,430 On Command Corp.* $ 51,450
1,320 ProBusiness Services, Inc.* 34,073
1,136 Quintiles Transnational Corp.* 19,383
2,040 The Scotts Co.* 85,680
2,345 Sylvan Learning Systems, Inc.* 37,373
----------
580,222
----------
CONSULTING SERVICES: 3.26%
1,725 AnswerThink Consulting Group* 42,155
550 T. Rowe Price Associates Investment Mgmt., Inc. 21,725
1,315 Wind River Systems, Inc.* 47,669
----------
111,549
----------
DATA PROCESSING: 1.42%
1,300 Choicepoint, Inc.* 48,588
----------
DISTRIBUTION/WHOLESALE: 5.10%
740 CDW Computer Centers Inc.* 62,484
2,815 Daisytek International Corp.* 44,512
810 Scansource, Inc.* 28,755
1,175 Tech Data Corp.* 38,628
----------
174,379
----------
ELECTRICAL COMPONENTS & EQUIPMENT: 4.38%
1,500 Cabletron Systems, Inc.* 43,969
900 Jabil Circuit, Inc.* 38,925
1,410 Richie Brothers Auctioneers* 35,955
1,715 Vicor Corp.* 30,870
----------
149,719
----------
13
<PAGE>
FLEMING SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS AT MARCH 31, 2000 (UNAUDITED) - (CONTINUED)
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
ELECTRONICS: 3.48%
670 Cyberoptics Corp.* $ 28,433
860 Electronics for Imaging, Inc. 51,600
615 Kemet Corp.* 38,899
----------
118,932
----------
FINANCE: 4.15%
6,127 Americredit Corp.* 99,944
420 Duff & Phelps Credit Rating 41,869
----------
141,813
----------
HAND/MACHINE TOOLS: 1.76%
2,105 Applied Power, Inc. - Class A 59,993
----------
HEALTH CARE: 1.39%
1,725 Henry Schein, Inc.* 27,923
1,695 Staar Surgical Co.* 19,704
----------
47,627
----------
INSURANCE BROKERS: 1.02%
900 Brown & Brown, Inc. 34,819
----------
LEISURE TIME: 2.40%
3,250 American Classic Voyages* 81,859
----------
MEDIA: 7.08%
1,785 Information Holdings, Inc.* 55,893
3,660 Penton Media, Inc. 95,160
2,845 Primedia, Inc.* 91,040
----------
242,093
----------
14
<PAGE>
FLEMING SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS AT MARCH 31, 2000 (UNAUDITED) - (CONTINUED)
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING: 6.38%
950 Carbo Ceramics Inc. $ 26,719
1,830 Falcon Products, Inc. 21,846
1,355 Mettler-Toledo International, Inc.* 55,470
1,030 Oshkosh Truck Corp. 31,994
1,065 Rayovac Corp.* 24,764
1,325 Ventana Medical Systems, Inc.* 57,223
----------
218,016
----------
OILS & GAS PRODUCERS: 4.69%
820 Devon Energy Corp. 39,821
1,745 Newfield Exploration Co.* 61,511
2,925 Vintage Petroleum, Inc. 58,866
----------
160,198
----------
REAL ESTATE INVESTMENT MANAGEMENT: 3.61%
4,605 Grubb & Ellis Co.* 25,903
1,595 Prologis Trust 30,704
1,890 SL Green Realty Corp. 44,888
1,995 Trammel Crow Co.* 22,070
----------
123,565
----------
RETAIL: 3.67%
2,917 Regis Corp. 43,208
1,890 Tractor Supply Co.* 38,745
980 Tweeter Home Entertainment Group, Inc.* 43,365
----------
125,318
----------
SOFTWARE: 9.72%
3,300 Acxiom Corp.* 109,721
1,904 Advent Software, Inc.* 87,346
1,465 CSG Systems International, Inc.* 71,510
15
<PAGE>
FLEMING SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS AT MARCH 31, 2000 (UNAUDITED) - (CONTINUED)
--------------------------------------------------------------------------------
Shares Value
--------------------------------------------------------------------------------
SOFTWARE: - (CONTINUED)
830 Rational Software Corp.* $ 63,495
----------
332,072
----------
TRANSPORTATION: 4.03%
3,615 American Freightways Corp.* 53,999
1,045 Expeditors International Wash, Inc. 41,539
2,055 Swift Transportation Co., Inc.* 42,128
----------
137,666
----------
TRAVEL SERVICES: 1.82%
3,932 Pegasus Systems, Inc.* 62,175
----------
TOTAL COMMON STOCKS
(cost $2,908,595) 3,324,354
----------
Principal
Amount SHORT-TERM INVESTMENT: 2.82%
--------------------------------------------------------------------------------
MONEY MARKET INVESTMENT: 2.82%
$96,408 Firstar Stellar Treasury Fund (cost $96,408) 96,408
----------
TOTAL INVESTMENTS: 100.09%
(cost $3,005,003) 3,420,762
Liabilities in excess of Other Assets: (0.09%) (3,194)
----------
NET ASSETS: 100.00% $3,417,568
==========
* Non-income producing security.
See accompanying Notes to Financial Statements.
16
<PAGE>
FLEMING MUTUAL FUND GROUP, INC.
STATEMENTS OF ASSETS AND LIABILITIES AT MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Fleming Mid Cap Fleming Small Cap
Value Fund Growth Fund
--------------- -----------------
<S> <C> <C>
ASSETS
Investments securities at value
(cost $4,024,244 and $3,005,003, respectively) $ 4,276,630 $ 3,420,762
Receivables:
Investment securities sold 22,720 2,469
From Adviser 7,566 11,199
Dividends and interest income 4,020 1,838
Deferred organization costs, net 36,248 36,126
Other assets 7,619 5,619
----------- -----------
Total assets 4,354,803 3,478,013
----------- -----------
LIABILITIES
Payable:
Investment securities purchased -- 16,707
Accrued expenses 38,325 43,738
----------- -----------
Total liabilities 38,325 60,445
----------- -----------
NET ASSETS $ 4,316,478 $ 3,417,568
=========== ===========
COMPOSITION OF NET ASSETS
Paid-in capital $ 3,938,110 $ 2,701,391
Accumulated net investment income (loss) 7,914 (9,762)
Accumulated net realized gain on investments 118,068 310,180
Net unrealized appreciation on investments 252,386 415,759
----------- -----------
Net assets $ 4,316,478 $ 3,417,568
=========== ===========
Net asset value, offering and redemption price per share
(unlimited shares authorized, no par value) 375,433 238,307
=========== ===========
Net asset value per share $ 11.50 $ 14.34
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
17
<PAGE>
FLEMING MUTUAL FUND GROUP, INC.
STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Fleming Mid Cap Fleming Small Cap
Value Fund Growth Fund
--------------- -----------------
<S> <C> <C>
INVESTMENT INCOME
INCOME
Dividends $ 29,577 $ 4,216
Interest 6,427 3,342
--------- ---------
Total income 36,004 7,558
EXPENSES
Advisory fees 16,940 12,772
Custodian fees 1,932 3,055
Administration fees 20,055 20,055
Fund accounting fees 8,960 9,626
Transfer agent fees 6,866 5,822
Legal fees 5,014 5,014
Insurance expense 4,384 1,755
Audit fees 8,197 8,191
Registration expense 2,306 6,249
Director fees 4,012 4,084
Amortization of deferred organization costs 5,340 5,200
Miscellaneous expenses 1,706 186
--------- ---------
Total expenses 85,712 82,009
Less: Fees waived and expenses absorbed (62,148) (64,699)
--------- ---------
Net expenses 23,564 17,310
--------- ---------
NET INVESTMENT INCOME (LOSS) 12,440 (9,752)
--------- ---------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 214,348 330,241
Net unrealized appreciation on investments 142,533 323,346
--------- ---------
Net realized and unrealized gain on investments 356,881 653,587
--------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 369,321 $ 643,835
========= =========
</TABLE>
See accompanying Notes to Financial Statements.
18
<PAGE>
FLEMING MUTUAL FUND GROUP, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Fleming Mid Cap Value Fund
-------------------------------------
Six Months Ended Year Ended
March 31, 2000* September 30, 1999
--------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS
Net investment income $ 12,440 $ 1,973
Net realized gain on investments 214,348 683,996
Net unrealized appreciation
on investments 142,533 222,974
----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 369,321 908,943
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (22,002) (22,787)
From net realized gain (780,276) (52,495)
----------- -----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (802,278) (75,282)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 777,632 386,384
Net asset value of shares issued on
reinvestment of distributions 774,077 69,588
Cost of shares redeemed (354,231) (610,446)
----------- -----------
NET INCREASE (DECREASE) FROM
CAPITAL SHARE TRANSACTIONS 1,197,478 (154,474)
----------- -----------
NET INCREASE IN NET ASSETS 764,521 679,187
NET ASSETS
Beginning of period 3,551,957 2,872,770
----------- -----------
END OF PERIOD
(including accumulated net investment income
of $7,914 and $17,476, respectively) $ 4,316,478 $ 3,551,957
=========== ===========
CHANGE IN SHARES
Shares sold 69,780 29,529
Shares issued on reinvestment of distributions 69,052 5,253
Shares redeemed (25,272) (43,354)
----------- -----------
Net increase (decrease) 113,560 (8,572)
=========== ===========
</TABLE>
* Unaudited.
See accompanying Notes to Financial Statements.
19
<PAGE>
FLEMING MUTUAL FUND GROUP, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Fleming Small Cap Growth Fund
-------------------------------------
Six Months Ended Year Ended
March 31, 2000* September 30, 1999
--------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS
Net investment loss $ (9,752) $ (10,176)
Net realized gain on investments 330,241 328,518
Net unrealized appreciation
on investments 323,346 214,236
----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 643,835 532,578
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (5,720) (6,652)
From net realized gain (348,579) (39,511)
----------- -----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (354,299) (46,163)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 992,524 185,653
Net asset value of shares issued on
reinvestment of distributions 350,084 45,356
Cost of shares redeemed (28,052) (10,617)
----------- -----------
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS 1,314,556 220,392
----------- -----------
NET INCREASE IN NET ASSETS 1,604,092 706,807
NET ASSETS
Beginning of period 1,813,476 1,106,669
----------- -----------
END OF PERIOD
(including accumulated net investment income (loss)
of ($9,762) and $5,710, respectively) $ 3,417,568 $ 1,813,476
=========== ===========
CHANGE IN SHARES
Shares sold 76,953 14,951
Shares issued on reinvestment of distributions 28,695 3,854
Shares redeemed (2,197) (830)
----------- -----------
Net increase 103,451 17,975
=========== ===========
</TABLE>
* Unaudited.
See accompanying Notes to Financial Statements.
20
<PAGE>
FLEMING MUTUAL FUND GROUP, INC.
FINANCIAL HIGHLIGHTS
Selected per share data for one share outstanding throughout each period.
<TABLE>
<CAPTION>
Fleming Mid Cap Value Fund
-------------------------------------------------------------
Six Months Ended Year Ended November 13, 1997 **
March 31, 2000* September 30, 1999 to September 30, 1998
--------------- ------------------ ---------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.56 $ 10.62 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.04 0.02 0.11
Net realized and unrealized gain
on investments 1.09 3.20 0.54
------- ------- -------
Total from investment operations 1.13 3.22 0.65
------- ------- -------
LESS DISTRIBUTIONS:
From net investment income (0.09) (0.10) (0.03)
From net realized gain (3.10) (0.18) --
------- ------- -------
Total distributions (3.19) (0.28) (0.03)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 11.50 $ 13.56 $ 10.62
======= ======= =======
Total return 8.97%+ 30.41% 6.50%+
Net assets, end of period (millions) $ 4.3 $ 3.6 $ 2.9
Ratio of expenses to average net assets:
Before fees waived and expenses absorbed 4.56%++ 5.11% 7.72%++
After fees waived and expenses absorbed 1.25%++ 1.25% 1.25%++
Ratio of net investment income to average
net assets (after fees waived and
expenses absorbed) 0.66%++ 0.06% 0.73%++
Portfolio turnover rate 51.83%+ 108.74% 73.34%+
</TABLE>
* Unaudited.
** Commencement of operations.
+ Not annualized.
++ Annualized.
See accompanying Notes to Financial Statements.
21
<PAGE>
FLEMING MUTUAL FUND GROUP, INC.
FINANCIAL HIGHLIGHTS
Selected per share data for one share outstanding throughout each period.
<TABLE>
<CAPTION>
Fleming Small Cap Growth Fund
-------------------------------------------------------------
Six Months Ended Year Ended November 14, 1997**
March 31, 2000* September 30, 1999 to September 30, 1998
--------------- ------------------ ---------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.45 $ 9.47 $10.00
------ ------ ------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.04) 0.08 0.08
Net realized and unrealized gain (loss)
on investments 3.52 4.28 (0.59)
------ ------ ------
Total from investment operations 3.48 4.36 (0.51)
------ ------ ------
LESS DISTRIBUTIONS:
From net investment income (0.04) (0.09) (0.02)
From net realized gain (2.55) (0.29) --
------ ------ ------
Total distributions (2.59) (0.38) (0.02)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $14.34 $13.45 $ 9.47
====== ====== ======
Total return 29.30%+ 46.61% (5.15%)+
Net assets, end of period (millions) $ 3.4 $ 1.8 $ 1.1
Ratio of expenses to average net assets:
Before fees waived and expenses absorbed 6.37%++ 10.19% 13.84%++
After fees waived and expenses absorbed 1.35%++ 1.35% 1.35%++
Ratio of net investment loss to average
net assets (after fees waived and
expenses absorbed) (0.76%)++ (0.68%) (0.30%)++
Portfolio turnover rate 46.97%+ 70.75% 35.47%+
</TABLE>
* Unaudited.
** Commencement of operations.
+ Not annualized.
++ Annualized.
See accompanying Notes to Financial Statements.
22
<PAGE>
FLEMING MUTUAL FUND GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
(1) ORGANIZATION
The Fleming Mutual Fund Group, Inc., (the "Group"), (formally Fleming
Capital Mutual Fund Group, Inc.) 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 consists of two separate series: the Fleming Mid Cap Value Fund
(formally Fleming Fund) and the Fleming Small Cap Growth Fund (formally
Fleming Fledgling Fund) (each a "Fund" and collectively the "Funds") which
seek growth through capital appreciation. 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. Investment operations
began on November 13, 1997 for the Fleming Mid Cap Value Fund and November
14, 1997 for the Fleming Small Cap Growth 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. Expenses directly attributable to each Fund are charged to
that Fund's operations; expenses which are applicable to both Funds are
allocated among them on a pro-rata basis.
(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 of Directors.
(b) Organization Costs
Costs incurred by the Funds in connection with their organization,
registration and the initial public offering of shares have been
deferred and are amortized over 5 years. If any of the 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.
23
<PAGE>
FLEMING MUTUAL FUND GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
--------------------------------------------------------------------------------
(c) 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.
(d) Distributions to Shareholders
Distributions from net investment income and net realized gains are
generally declared and paid 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.
(e) Investment Transactions and Investment Income
Investment transactions are accounted for on trade date. The Funds
determine the gain or loss realized from investment transactions using
the identified cost method. Dividend income is recognized on the
ex-dividend date and interest income is recognized on an accrual
basis. Discounts are accreted and premiums are amortized as
adjustments to interest income and the identified cost of investments.
(3) INVESTMENT ADVISER AND OTHER TRANSACTIONS WITH AFFILIATES
The Group has an Investment Advisory Agreement with the Adviser, with whom
certain officers and directors of the Funds are affiliated, 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:
24
<PAGE>
FLEMING MUTUAL FUND GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
--------------------------------------------------------------------------------
Prior to Effective on
March 31, 2000 April 1, 2000
-------------- -------------
Fleming Mid Cap Value Fund 0.90% 0.70%
Fleming Small Cap Growth Fund 1.00% 0.80%
The Funds are responsible for their own operating expenses. The Adviser had
contractually agreed to limit the Funds total operating expenses (excluding
interest and taxes) to not more than 1.25% of the average daily net assets
for the Fleming Mid Cap Value Fund and 1.35% of the average daily net
assets for the Fleming Small Cap Growth Fund. The contract had a one-year
term ending February, 2001. Effective April 1, 2000, the Adviser has
contractually agreed to limit total operating expenses (excluding interest
and taxes) to not more than 0.75% of the average daily net assets for the
Fleming Mid Cap Value Fund and 0.85% of the average daily net assets for
the Fleming Small Cap Growth Fund. This new contract, which supercedes the
existing contract, has a one-year term ending March 31, 2001. Any fee
waived and/or any Fund expense absorbed by the Adviser pursuant to an
agreed upon expense cap shall be reimbursed by the Funds to the Adviser, if
so requested by the Adviser, provided the aggregate amount of the Funds'
current operating expense for such fiscal year does not exceed the
applicable limitation on the Funds' total operating expenses.
For the six months ended March 31, 2000, the Adviser waived fees of $16,940
and absorbed expenses of $45,208 for the Fleming Mid Cap Value Fund and
waived fees of $12,772 and absorbed expenses of $51,927 for the Fleming
Small Cap Growth Fund. At March 31, 2000, the cumulative unreimbursed
amount paid and/or waived by the Adviser on behalf of the Fleming Mid Cap
Value Fund and Fleming Small Cap Growth Fund is $328,470 and $331,545,
respectively. For the Fleming Mid Cap Value Fund, the Adviser may recapture
$131,012 of the above amount no later than September 30, 2001, $135,310 no
later than September 30, 2002 and $62,148 no later than September 30, 2003.
For the Fleming Small Cap Growth Fund, the Adviser may recapture $134,932
no later than September 30, 2001, $131,914 no later than September 30, 2002
and $64,699 no later than September 30, 2003. The Funds must pay their
current ordinary operating expense before the Adviser is entitled to any
reimbursement. Any such reimbursement is also contingent upon the Board of
Trustees review and approval prior to the time the reimbursement is
initiated.
Investment Company Administration, L.L.C. is the Administrator to the Funds
pursuant to an administration agreement. Each Fund pays 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% assets over $500 million,
payable monthly and subject to a minimum annual fee of $40,000 per Fund.
25
<PAGE>
FLEMING MUTUAL FUND GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
--------------------------------------------------------------------------------
First Fund Distributors, Inc., an affiliate of the Administrator, 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 expense.
Certain officers of the Adviser, Administrator and Distributor are also
officers and/or Directors of the Funds.
(4) INVESTMENT TRANSACTIONS
For the six months ended March 31, 2000, the aggregate purchases and sales
of securities, excluding short-term investments, for the Funds are
summarized below:
Fleming Mid Fleming Small
Cap Value Fund Cap Growth Fund
-------------- ---------------
Purchases $2,136,995 $2,043,599
Sales 1,834,657 1,127,501
At March 31, 2000, the Fleming Mid Cap Value Fund and the Fleming Small Cap
Growth Fund had gross unrealized appreciation and depreciation of
investments, based on cost for federal income tax purposes of $4,024,244
and $3,005,003 respectively, as follows:
Fleming Mid Fleming Small
Cap Value Fund Cap Growth Fund
-------------- ---------------
Gross unrealized appreciation $ 461,385 $ 690,702
Gross unrealized depreciation (208,999) (278,083)
--------- ---------
Net unrealized appreciation $ 252,386 $ 412,619
========= =========
26
<PAGE>
--------------------------------------------------------------------------------
Adviser
ROBERT FLEMING, INC.
320 Park Avenue, 11th Floor
New York, NY 10022
(212) 508-3900
Distributor
FIRST FUND DISTRIBUTORS, INC.
4455 E. Camelback Road, Suite 261E
Phoenix, AZ 85018
Custodian
FIRSTAR BANK, N.A.
615 E. Michigan Street
Milwaukee, WI 53202
Transfer Agent
INTEGRATED FUND SERVICES, INC.
312 Walnut Street, 21st Floor
Cincinnati, OH 45202
(513) 629-2011
Legal Counsel
MORGAN, LEWIS & BOCKIUS, LLP
1800 M Street NW, 9th Floor
Washington, DC 20036
--------------------------------------------------------------------------------
This report is intended for the shareholders of the Funds and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a
representation of future performance. Share price and returns will fluctuate sa
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are dated and are subject to change.
