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THE MOTORSPORTS ASSOCIATED
GROWTH & INCOME FUND
[GRAPHIC OF RACE CAR APPEARS HERE]
Semi-Annual Report
August 31, 1998
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October 23, 1998
Dear Shareholder:
We are pleased to provide you with the initial Semi-Annual Report for The
Motorsports Growth and Income Fund, dated August 31, 1998.
The Motorsports Associated Growth and Income Fund commenced operations on June
5, 1998 when the Securities and Exchange Commission declared the registration
statement relating to the Fund's Class A shares effective.
In keeping with its investment objective, as of August 31, 1998, the Fund owned
shares in 35 different companies, with approximately 88% of its assets invested
in companies either directly related to or associated with motorsports or in
cash.
We are excited about the potential for future growth of motorsports and the
effect that this growth will have on companies associated with the sport. As
the Fund's assets increase, we will be positioned to take advantage of this
growth.
We look forward to the future. Thank you for your interest in The Motorsports
Associated Growth and Income Fund.
Sincerely,
/s/ Jack Plymale
- -----------------
Jack Plymale
President
Distributed by FPS Broker Services, Inc.
3200 Horizon Drive, King of Prussia, PA 19406
To be preceded or accompanied by a Prospectus, dfu 10/98
<PAGE>
THE MOTORSPORTS ASSOCIATED GROWTH & INCOME FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) AUGUST 31, 1998
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<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------- --------
<C> <S> <C>
COMMON STOCKS - 80.42%
BASIC MATERIALS - 2.59%
70 Monsanto Co. ............................ $ 3,828
--------
CAPITAL GOODS - 4.98%
155 Kennametal, Inc. ........................ 4,020
85 W. W. Grainger, Inc. .................... 3,331
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7,351
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COMMUNICATIONS - 5.22%
70 Northern Telecom, Ltd. .................. 3,343
65 Sprint Corp. ............................ 4,359
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7,702
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CONSUMER CYCLICALS - 6.86%
75 Action Performance Cos., Inc.* .......... 1,734
65 Ford Motor Co. .......................... 2,860
55 General Motors Corp. .................... 3,176
90 Snap-on, Inc. ........................... 2,362
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10,132
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CONSUMER SERVICES - 7.87%
170 International Speedway Corp., Class B ... 4,675
115 Penske Motorsports, Inc.* ............... 2,343
150 Republic Industries, Inc.* .............. 2,653
120 Speedway Motorsports, Inc.* ............. 1,950
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11,621
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CONSUMER STAPLES - 15.27%
60 Adolph Coors Co., Class B ............... 2,475
65 Anheuser-Busch Cos., Inc. ............... 2,998
180 Flowers Industries, Inc. ................ 3,206
140 PepsiCo, Inc. ........................... 3,876
100 Philip Morris Cos., Inc. ................ 4,156
65 Quaker Oats Co. ......................... 3,453
110 RJR Nabisco Holdings Corp. .............. 2,386
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22,550
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DIVERSIFIED MANUFACTURING - 4.26%
35 Johnson Controls, Inc. .................. 1,498
70 Minnesota Mining & Manufacturing Co. .... 4,795
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6,293
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ENERGY - 4.50%
85 Pennzoil Co. ............................ 3,039
65 Texaco, Inc. ............................ 3,612
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6,651
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</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE MOTORSPORTS ASSOCIATED GROWTH & INCOME FUND
SCHEDULE OF INVESTMENTS - CONTINUED (UNAUDITED) AUGUST 31, 1998
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<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------- --------
<C> <S> <C>
COMMON STOCKS - continued
FINANCE - 3.10%
75 MBNA Corp. .............................. $ 1,763
70 Union Planters Corp. .................... 2,818
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4,581
--------
HEALTH CARE - 14.17%
70 Glaxo Wellcome PLC - ADR*** ............. 3,889
70 Johnson & Johnson ....................... 4,830
35 Pfizer, Inc. ............................ 3,255
100 SmithKline Beecham PLC - ADR*** ......... 5,688
50 Warner-Lambert Co. ...................... 3,263
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20,925
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RETAILING - 2.40%
170 The Limited, Inc. ....................... 3,549
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TECHNOLOGY - 9.20%
110 Pitney Bowes, Inc. ...................... 5,459
75 QUALCOMM, Inc.* ......................... 3,295
55 Xerox Corp. ............................. 4,830
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13,584
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Total Common Stocks (Cost $141,151) ..... 118,767
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Total Investments
(Cost $141,151**) - 80.42% ............. 118,767
Other Assets, Less Other
Liabilities - 19.58% ................... 28,914
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NET ASSETS - 100.00% .................... $147,681
========
</TABLE>
* Non-income producing security
** Cost for Federal income tax purposes is $141,151 and net unrealized
depreciation consists of:
Gross unrealized appreciation................ $ 1,023
Gross unrealized depreciation................ (23,407)
--------
Net unrealized depreciation.................. $(22,384)
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*** ADR: American Depository Receipt
See accompanying notes to financial statements.
<PAGE>
THE MOTORSPORTS ASSOCIATED GROWTH & INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) AUGUST 31, 1998
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<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at market value (Cost $141,151) (Note 1) .. $ 118,767
Cash .................................................. 13,239
Receivables:
Investment securities sold ........................ 6,006
Dividends and interest ............................ 362
Deferred unamortized organization costs (Note 1) ...... 61,760
Other assets .......................................... 22,247
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TOTAL ASSETS ................................ 222,381
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LIABILITIES:
Payables:
Accrued expenses .................................. 44,220
Accrued distribution expense (Note 3) ............. 80
Due to Advisor (Note 3) ........................... 30,400
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TOTAL LIABILITIES ........................... 74,700
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NET ASSETS:
Applicable to 11,523 shares; unlimited number of shares
of beneficial interest authorized with no par value. $ 147,681
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Net asset value and redemption price per share
($147,681 divided 11,523 shares) .................... $ 12.82
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Offering price per share
($12.82 divided 0.9425) ............................. $ 13.60
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NET ASSETS CONSIST OF:
Paid-in capital ....................................... $ 171,644
Accumulated undistributed net investment income ....... 88
Accumulated net realized loss on investments .......... (1,687)
Net unrealized depreciation on investments ............ (22,384)
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NET ASSETS .................................. $ 147,681
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</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE MOTORSPORTS ASSOCIATED GROWTH & INCOME FUND
STATEMENT OF OPERATIONS (UNAUDITED)
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<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 1, 1998*
THROUGH
AUGUST 31, 1998
--------------------
<S> <C>
INVESTMENT INCOME:
Dividends ..................................... $ 447
Interest ...................................... 281
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TOTAL INCOME ........................ 728
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EXPENSES:
Investment advisory fees (Note 3) ............. 304
Administration fees ........................... 14,135
Transfer agent fees ........................... 9,006
Registration fees ............................. 7,737
Accounting fees ............................... 6,092
Auditing fees ................................. 5,051
Amortization of organization costs (Note 1) ... 3,240
Legal fees .................................... 3,011
Custodian fees ................................ 2,301
Insurance expense ............................. 2,214
Trustees' fees ................................ 2,175
Printing expense .............................. 1,673
Miscellaneous expenses ........................ 335
Distribution expense (Note 3) ................. 80
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TOTAL EXPENSES ...................... 57,354
Expenses waived and reimbursed by
Advisor (Note 3) ................... (56,714)
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NET EXPENSES ........................ 640
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NET INVESTMENT INCOME ............................ 88
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REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments .............. (1,687)
Net change in unrealized appreciation
(depreciation) on investments ................. (22,384)
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NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS ..................... (24,071)
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NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS ...................................... $ (23,983)
==========
</TABLE>
*Commencement of investment operations.
See accompanying notes to financial statements.
<PAGE>
THE MOTORSPORTS ASSOCIATED GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
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<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 1, 1998*
THROUGH
AUGUST 31, 1998
-------------------
<S> <C>
OPERATIONS:
Net investment income .......................... $ 88
Net realized loss on investments ............... (1,687)
Net change in unrealized appreciation
(depreciation) on investments .................. (22,384)
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Net decrease in net assets resulting from
operations .................................... (23,983)
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CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ...................... 71,664
Cost of shares redeemed ........................ 0
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Increase in net assets derived from capital
share transactions (a) ........................ 71,664
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TOTAL INCREASE IN NET ASSETS ........... 47,681
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NET ASSETS:
Beginning of period ............................ 100,000
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End of period (including undistributed net
investment income $88) ........................ 147,681
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(a) Transactions in capital stock were:
Shares sold ................................ 4,856
Shares redeemed ............................ 0
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Increase in shares outstanding ................ 4,856
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</TABLE>
*Commencement of investment operations.
See accompanying notes to financial statements.
<PAGE>
THE MOTORSPORTS ASSOCIATED GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
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The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 1, 1998*
THROUGH
AUGUST 31, 1998
----------------
<S> <C>
Net asset value, beginning of period ................... $ 15.00
-----------
Income from investment operations:
Net investment income ........................... 0.01
Net realized and unrealized loss on investments . (2.19)
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Total from investment operations .............. (2.18)
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Net asset value, end of period ......................... $ 12.82
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Total return** ........................................ (14.53%)
Ratios/Supplemental Data
Net assets, end of period (in 000s) ................ $ 148
Ratio of expenses to average net assets:
Before expense reimbursement .................. 179.19% /1/
After expense reimbursement ................... 2.00% /1/
Ratio of net investment income to average net assets:
Before expense reimbursement ................... (176.92%)/1/
After expense reimbursement .................... 0.27% /1/
Portfolio turnover rate ............................. 8.09%
</TABLE>
* Commencement of investment operations.
** Total return calculation does not reflect sales load.
/1/ Annualized.
See accompanying notes to financial statements.
<PAGE>
THE MOTORSPORTS ASSOCIATED GROWTH & INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) AUGUST 31, 1998
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NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
The Sports Funds Trust (the "Trust") is a Delaware business trust organized
pursuant to a trust instrument dated November 4, 1997. The Trust is registered
under the Investment Company Act of 1940, as amended, as an open-end,
diversified management investment company. The Trust is organized to offer
separate series of shares and currently offers a single series of shares, The
Motorsports Associated Growth & Income Fund (the "Fund"). Currently, there is
one class of shares issued by the Fund. The Board of Trustees may establish,
without shareholder approval, additional series or classes of shares. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements which conform to generally
accepted accounting principles for investment companies.
A. SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the last reported sales price. Unlisted
securities, or listed securities in which there were no sales, 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.
B. 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.
C. ORGANIZATION COSTS. Organization costs are being amortized on a straight
line basis over five years from commencement of operations.
D. 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.
E. DISTRIBUTIONS TO SHAREHOLDERS. The Fund will distribute substantially all
of its net investment income and capital gains to shareholders each year.
Normally, income dividends will be declared in March, June, September and
December. Capital gains, if any, will normally be distributed in December.
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.
F. USE OF ESTIMATES. Management may make 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
$151,536 and $8,699, respectively, for the period June 1, 1998 through August
31, 1998.
<PAGE>
THE MOTORSPORTS ASSOCIATED GROWTH & INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED AUGUST 31, 1998
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NOTE 3 - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pegasus Advisory Group, 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 at the annual rate of
0.95% of the Fund's average daily net assets. The Advisor has entered into a
subadvisory agreement with Chartwell Investment Partners L.P. (the "Sub-
Advisor") to assist in the selection and management of the Fund's investment
securities. For its services, the Sub-Advisor is paid an annual fee by the
Advisor equal to 0.70% of the Fund's average daily net assets.
The Advisor has voluntarily agreed to waive its fees and reimburse the Fund to
the extent total annualized fund operating expenses, inclusive of distribution
expenses, exceed 2.00% of the Fund's average daily net assets. For the period
June 1, 1998 through August 31, 1998, advisory fees of $304 were paid to the
Advisor and the Advisor reimbursed the Fund $56,714. Certain officers and
trustees of the Fund are affiliated persons of the Advisor. All officers serve
without direct compensation from the Fund.
The Fund has adopted a Distribution Plan (the "Plan"), pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, which permits the Fund to
pay certain expenses associated with the distribution of its shares. The Plan
provides that the Fund will reimburse FPS Broker Services, 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 June 1, 1998 through August 31, 1998, the Fund reimbursed the
Distributor $80 for distribution costs incurred.
<PAGE>
INVESTMENT ADVISOR
Pegasus Advisory Group, Inc.
5-H Oak Branch Drive
Greensboro, NC 27407
INVESTMENT SUB-ADVISOR
Chartwell Investment Partners L.P.
1235 Westlakes Drive
Suite 330
Berwyn, PA 19312
DISTRIBUTOR
FPS Broker Services, Inc.
3200 Horizon Drive, P.O. Box 61503
King of Prussia, PA 19406
(800) 358-6215
SHAREHOLDER SERVICES
First Data Investor Services Group, Inc.
3200 Horizon Drive, P.O. Box 61503
King of Prussia, PA 19406
(800) 358-6215 or (610) 239-4600
CUSTODIAN
The Bank of New York
48 Wall Street
New York, NY 10286
LEGAL COUNSEL
Dechert Price and Rhoads
1775 Eye Street, NW
Washington, DC 20006
AUDITORS
PricewaterhouseCoopers LLP
30 South 17/th/ Street
Philadelphia, PA 19103
For investment information call the distributor
FPS Broker Services, Inc. at 1-800-358-6215
or visit our WEB site @http://www.pegasussports.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.