THE
PHEONIX
MANAGEMENT FUND
SEMI-ANNUAL REPORT
MAY 31, 2000
(UNAUDITED)
<PAGE>
Dear Shareholders:
On behalf of Thomas Abrams, the founder of Pheonix Financial Groups and the
author of the overall investment style that this fund employs, I would like to
welcome our shareholders to the Pheonix Management Fund. In this first letter to
shareholders of the fund I would like to focus on our investment strategy and
why I feel it can benefit shareholders as a part of their long-term investment
portfolio.
We select our equity securities in much the same way we would evaluate a
business for acquisition in its entirety. We want the business to be
1. A business that is relatively easy to understand.
2. A business that has a long-term, durable, competitive advantage.
3. A business operated by competent management.
4. A business that is available for purchase at a very attractive price.
A final aspect of our investment style is that we believe in focusing our
investment portfolio on our best ideas. You should know what you own intimately
and not got involved in more businesses than you can handle, or effectively
manage and monitor.
In the spirit of this philosophy you will see by reading through the next few
pages that we own for our shareholders some of the finest, blue-chip businesses
in America from many diverse industries.
The largest position in our portfolio currently is an old, local favorite,
Office Depot. The nations leading office supply retailer has once again fallen
out of favor on Wall Street as it has several times in the past. And yet Office
Depot passes our investment "litmus test" listed above with flying colors. The
company has made some key management changes and is in the process of making
business strategy changes that in our opinion will handsomely reward our
shareholders in the long run.
We believe that truly outstanding businesses can sometimes sell in the stock
market at very large discounts to their true worth. Bargains in business
ownership can at times be obtained through individual stock purchases with the
expectation that excellent results by corporations will translate over the long
term into correspondingly excellent market value.
We believe that this investment style, diligently followed and professionally
executed can yield superior long-term returns for investors. Our principle aim
going forward is to strive in our performance to meet or exceed shareholder
expectations.
/s/ Michael Burnick
Michael Burnick
Portfolio Manager
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PHEONIX MANAGEMENT FUND
SCHEDULE OF INVESTMENTS
MAY 31, 2000
(Unaudited) - (Continued)
MARKET
SHARES VALUE
------ -----
COMMON STOCKS - 83.57%
BEVERAGES - 3.09
<C> <S> <C>
2,500 Coca-Cola Co. ................................. $ 133,438
----------
CHEMICALS-DIVERSIFIED - 2.27%
2,000 Du Pont (E.I.) de Nemours ..................... 98,000
----------
COMMERCIAL SERVICES-FINANCE - 2.86%
4,000 H&R Block, Inc. ............................... 123,500
----------
COMPUTER-SOFTWARE - 4.34%
3,000 Microsoft Corp* ............................... 187,687
----------
CRUISE LINES - 2.51%
4,000 Carnival Corp. ................................ 108,500
----------
E-COMMERCE - 3.35%
3,000 Amazon.com, Inc* .............................. 144,938
----------
HEALTH CARE COST CONTAINMENT - 1.90%
5,000 McKesson HBOC, Inc. ........................... 82,187
----------
MUTUAL FUNDS - 9.11%
869 Fidelity Select Brokerage Investment* ......... 40,683
1,650 Fidelity Select Banking Portfolio ............. 48,664
435 Fidelity Select Computers* .................... 45,844
481 Fidelity Select Electronics* .................. 49,769
126 Fidelity Select Technology Fund* .............. 17,401
238 Invesco Technology Fund Class A* .............. 19,096
376 Invesco Telecommunications Fund IV* ........... 18,573
1,333 John Hancock Regional Bank Class B ............ 51,307
325 Managers Capital Appreciation Fund* ........... 17,271
1,201 T Rowe Price Science & Technology* ............ 68,252
1,482 Spectra Fund* ................................. 16,613
----------
393,473
----------
RETAIL - 39.82%
206,000 Office Depot* ................................. 1,454,875
18,000 Staples, Inc* ................................. 265,500
----------
1,720,375
----------
RETAIL-BOOKSTORE - 2.63%
6,000 Barnes & Noble, Inc.* ......................... 113,625
----------
The accompanying notes are an integral part of these financial statements.
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PHEONIX MANAGEMENT FUND
SCHEDULE OF INVESTMENTS
MAY 31, 2000
(Unaudited) - (Continued)
MARKET
SHARES VALUE
------ -----
COMMON STOCKS (CONTINUED)
RUBBER-TIRES - 2.88%
5,000 Goodyear Tire & Rubber Co. .................... $ 124,375
----------
STEEL-PRODUCERS - 2.70%
3,000 Nucor Corp. ................................... 116,625
----------
TELECOMMUNICATION SERVICES - 5.22%
6,000 Worldcom, Inc* ................................ 225,750
----------
TRUCKING & LEASING - .89%
2,000 Ryder System, Inc. ............................ 38,375
----------
TOTAL COMMON STOCKS
(Cost $4,388,815) ............................. 3,610,848
----------
PRINCIPAL
AMOUNT
-----------
SHORT TERM INVESTMENTS - 11.55%
$ 500,000 US Treasury Bills, 5.40%, due 06/14/00
(Cost $499,100) ............................... 499,100
----------
CONTRACTS
---------
WRITTEN PUT OPTIONS - (8.32)%
2,500 Office Depot, Oct/$7.50
(Premium $307,490) ............................. (359,375)
----------
TOTAL INVESTMENTS
(Cost $4,580,425 .............................86.80% 3,750,573
OTHER ASSETS LESS LIABILITIES ............... 13.20% 570,255
------ ---------
TOTAL NET ASSETS ........................... 100.00% $4,320,828
====== =========
At May 31, 2000, the cost for Federal income tax purposes is
$4,580,425. Gross unrealized appreciation and depreciation of
securities are as follows:
Gross unrealized appreciation................. $ 18,016
Gross unrealized depreciation................. (847,868)
----------
Net unrealized depreciation................... $ (829,852)
==========
<FN>
* Denotes non-income producing security.
</FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PHEONIX MANAGEMENT FUND
Statement of Assets and Liabilities
May 31, 2000
(UNAUDITED)
ASSETS:
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Investments in securities, at value
(cost $4,887,915) (Note 2) ............................. $ 4,109,948
Cash .................................................... 1,282,068
Deposits for options written ............................ 155,606
Receivable for securities sold .......................... 392,169
Receivable for Fund shares sold ......................... 318,010
Dividends and interest receivable ....................... 6,291
-----------
Total Assets ............................................ 6,264,092
-----------
LIABILITIES:
Written put options (premium $307,490) .................. 359,375
Payable for securities purchased ........................ 1,539,737
Payable for Fund shares repurchased ..................... 4,744
Accrued advisory fees ................................... 11,440
Accrued expenses and other liabilities .................. 27,968
-----------
Total Liabilities ....................................... 1,943,264
-----------
Net Assets ............................................ $ 4,320,828
===========
NET ASSETS CONSIST OF:
Paid in surplus ......................................... $ 5,060,958
Accumulated net investment income (loss) ................ (42,431)
Accumulated net realized gain (loss) from
investment transactions ............................ 132,153
Net unrealized appreciation (depreciation) on investments (829,852)
-----------
Net Assets ............................................ $ 4,320,828
===========
Net asset value and redemption price per share
($4,320,828/616,910 shares outstanding) ...................... $ 7.00
===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PHEONIX MANAGEMENT FUND
Statement of Operations
For the period December 27, 1999 (commencement of operations)
through May 31, 2000
(Unaudited)
<S> <C>
INVESTMENT INCOME:
Interest ................................................. $ 25,149
Dividends ................................................ 5,435
---------
Total Investment income .............................. 30,584
---------
EXPENSES:
Advisory fees (Note 3) ................................... 25,012
Distribution Fees (Note 5) ............................... 4,169
Administration fees (Note 4) ............................. 18,000
Transfer agent fees (Note 4) ............................. 6,986
Registration fees ........................................ 5,000
Directors fees ........................................... 2,220
Audit fees ............................................... 2,750
Custody fees ............................................. 909
Legal fees ............................................... 4,760
Printing and postage expense ............................. 750
Other expenses ........................................... 2,459
---------
Total expenses ....................................... 73,015
---------
Net investment income (loss) ........................... (42,431)
---------
NET REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS: (Note 2)
Net realized gain (loss) on securities transactions ...... 589,124
Net realized gain (loss) on option transactions .......... (456,971)
Net increase (decrease) in unrealized appreciation
on investments ......................................... (829,852)
---------
Net gain (loss) on investments ........................... (697,699)
---------
Net increase (decrease) in net assets resulting
from operations ........................................ $(740,130)
=========
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PHEONIX MANAGEMENT FUND
Statement of Changes in Net Assets
FOR THE PERIOD
DECEMBER 27, 1999*
THROUGH MAY 31, 2000
--------------------
(UNAUDITED)
OPERATIONS:
<S> <C>
Net investment income (loss) .................................. $ (42,431)
Net realized gain (loss) from investment transactions ......... 589,124
Net realized gain (loss) on option transactions ............... (456,971)
Net increase (decrease) in unrealized appreciation
on investments ............................................... (829,852)
-----------
Net increase (decrease) in net assets resulting from operations (740,130)
-----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income .......................... 0
Distributions from net realized gains on investments .......... 0
FUND SHARE TRANSACTIONS (1)
Proceeds from shares sold ..................................... 6,286,807
Dividends reinvested .......................................... 0
Payment for shares redeemed ................................... (1,225,849)
-----------
Net increase (decrease) in net assets from fund
share transactions ........................................... 5,060,958
-----------
Net increase (decrease) in net assets ......................... 4,320,828
NET ASSETS:
Beginning of period ........................................... 0
-----------
End of period ................................................. $ 4,320,828
===========
(1)Shares sold ................................................... 760,255
Dividends reinvested .......................................... 0
Shares redeemed ............................................... (143,345)
===========
Net increase (decrease) in fund shares ........................ 616,910
===========
<FN>
* Commencement of operations.
</FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<CAPTION>
PHEONIX MANAGEMENT FUND
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FOR THE PERIOD
DECEMBER 27, 1999*
THROUGH MAY 31, 2000
--------------------
(UNAUDITED)
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Net asset value, beginning of period ...................... $ 10.00
------------
INCOME (LOSS) FROM INVESTMENT OPERATONS:
Net investment income (loss) .............................. (0.07)
Net realized and unrealized gain (loss) on investments .... (2.93)
------------
Total from investment operations .......................... (3.00)
------------
Less distributions:
Dividends from net investment income ...................... 0.00
Distributions from net realized gains on investments ...... 0.00
------------
Total dividends and distributions ......................... 0.00
------------
Net asset value, end of period ............................ $ 7.00
============
Total return .............................................. (30.00%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) .................. $ 4,321
Ratio of expenses to average net assets ................... 4.36% +
Ratio of net investment income (loss) to average net assets (2.53%)+
Portfolio Turnover Rate ................................... 360.96%
<FN>
* Commencement of operations.
+ Annualized.
</FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
PHEONIX MANAGEMENT FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2000
(UNAUDITED)
NOTE 1. ORGANIZATION
Pheonix Management Fund (the "Fund") is a separate series of Questar Funds, Inc.
(the "Company"), a Maryland Corporation, incorporated on February 13, 1998, and
registered as an open-end, management investment company under the Investment
Company Act of 1940, as amended. The Fund's investment objective is to seek
capital appreciation by investing in a non-diversified portfolio of securities
consisting primarily of large and mid-sized companies. The Fund commenced
operations on December 27, 1999.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund. These policies are in conformity with generally accepted
accounting principles.
A. SECURITY VALUATION - Securities for which market quotations are
readily available are valued at market value. Portfolio
securities for which market quotations are not considered
readily available are stated at fair value on the basis of
valuations furnished by a pricing service approved by the Board
of Directors. Short-term investments held by the Fund that
mature in 60 days or less are valued at amortized cost, which
approximates market value. All other securities and assets are
valued at their fair value following procedures approved by the
Board of Directors.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Securities
transactions are accounted for on the trade date. Dividend
income is recorded on the ex-dividend date. Interest income is
recorded on the accrual basis.
C. FEDERAL INCOME TAXES - The Fund intends to comply with
requirements of the Internal Revenue Code applicable to
regulated investment companies and to distribute all of its
taxable income to its shareholders. Therefore, no provision for
Federal income tax is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - The Fund records
dividends and distributions to shareholders on the ex-dividend
date. The Fund will distribute its net investment income, and
net realized capital gains, if any, annually.
E. USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could
differ from those estimates.
NOTE 3. INVESTMENT ADVISORY AGREEMENT
The Fund has an investment advisory agreement with Pheonix Investment
Management, Inc. (the "Advisor"). Pursuant to this agreement, for the first
three quarters of the Fund's operations, the Advisor will receive a fee equal
to 1.50% of the average daily net assets of the Fund. Beginning at the end of
the fourth quarter, this base, or "fulcrum" fee will increase or decrease
depending on the extent to which the Fund's total return exceeds, or falls
short of, the performance of the Dow Jones Industrial Average, an unmanaged
index composed of 30 widely held stocks. The Advisor may voluntarily waive
some or all of its fees. For the period ended May 31, 2000, the Advisor earned
fees of $25,012, without any waivers.
<PAGE>
PHEONIX MANAGEMENT FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2000
(UNAUDITED)-(CONTINUED)
NOTE 4. FUND ADMINISTRATION AND TRANSFER AGENCY AGREEMENT
The Fund has an administration and transfer agency agreement with American
Data Services, Inc. ("ADS" or the "Administrator"), of which the Fund's
president is also an officer. Under this agreement, the Administrator provides
the Fund with administrative, transfer agency, and fund accounting services.
For the services rendered to the Fund by the Administrator, the Fund pays the
Administrator a monthly fee, equal to 1/12th of 0.15% of the first $75
million, 1/12th of 0.10% of the next $75 million, and 1/12th of 0.07% of the
remaining balance of the Fund's average monthly net assets. The fee is subject
to a monthly minimum of $3,000. ADS also receives a monthly transfer agency
fee, calculated as a combination of account maintenance charges plus
transaction charges, subject to a $1000 monthly minimum. The Fund also
reimburses ADS for any out-of-pocket expenses. For the period ended May 31,
2000, ADS earned $24,986 for administrative, transfer agency, and fund
accounting services.
NOTE 5. DISTRIBUTION FEES
The Board of Directors has adopted a Distribution Plan applicable to the Fund
under Section 12(b) of the 1940 Act and Rule 12b-1 thereunder. AmeriMutual
Funds Distributors, Inc. (the "Distributor"), an affiliate of American Data
Services, Inc., serves as the Fund's distributor. Pursuant to the Plan, the
Distributor will receive a monthly fee calculated at an annual rate of .25% of
its average daily net assets, to enable it to provide marketing and
promotional support to the Fund, shareholder servicing and maintaining
shareholder accounts and to make payments to broker/dealers and other
financial institutions for providing distribution assistance. For the period
ended May 31, 2000, the Fund incurred distribution expenses of $4,169.
NOTE 6. INVESTMENT TRANSACTIONS
For the period ended May 31, 2000, purchases and sales of investment
securities, excluding short-term securities, aggregated $12,794,766 and
$8,995,073, respectively.
<PAGE>
INVESTMENT ADVISOR
Pheonix Investment Management, Inc.
2090 Palm Beach Lakes Blvd., Suite 700
West Palm Beach, FL 33409
LEGAL COUNSEL
Spitzer & Feldman P.C.
405 Park Avenue
New York, NY 10022
INDEPENDENT AUDITORS
McCurdy & Associates CPA's, Inc.
27955 Clemens Road
Westlake, OH 44145
ADMINISTRATOR, TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, NY 11788
DISTRIBUTOR
AmeriMutual Funds Distributors, Inc.
150 Motor Parkway, Suite 109
Hauppauge, NY 11788
CUSTODIAN
Union Bank of California
475 Sansome Street, 15th Floor
San Francisco, CA 94111
This report is intended for shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
