FIDUCIARY MANAGEMENT ASSOCIATES -
LARGE CAPITALIZATION GROWTH PORTFOLIO
500 PLAZA DRIVE, SECAUCUS, NJ 07094, (201) 319-4000
ANNUAL REPORT
SEPTEMBER 30, 1996
FIDUCIARY MANAGEMENT ASSOCIATES -
LETTER TO SHAREHOLDERS LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
November 21, 1996
Dear Shareholder:
We are pleased to provide this first annual report for the Fiduciary Management
Associates - Large Capitalization Growth Portfolio. Shown below is the
Portfolio's total return from inception (May 2, 1996) through September 30,
1996. For comparison, we've also shown the return for the S&P 500 Stock Index,
a common measure of the broad stock market, during the same time period.
TOTAL RETURN
PERIOD ENDED SEPTEMBER 30, 1996
SINCE INCEPTION (MAY 2, 1996)
-----------------------------
FMA - LARGE-CAP PORTFOLIO 8.70%
S&P 500 STOCK INDEX 7.91%
THE S&P 500 IS UNMANAGED.
During the fiscal year ended September 30, 1996, U.S. corporations continued to
experience robust operating earnings and cash flow while the economic backdrop
remains one of moderate growth and moderate inflation. The position of U.S.
companies in the world economy is strong, underpinned by technology leadership
and many years of corporate cost cutting. Finally, there is nothing in the
fiscal or monetary policy arenas to cause significant concern. By our
calculation, the price/earnings ratio for the market is in the mid-range for
normal market environments. While some increase in this ratio is possible, we
expect consistent, moderately-rising corporate earnings to result in higher
equity prices. We believe that well-chosen growth equities can still provide a
comfortable average annual return in excess of the 7% yield of long U.S.
Treasury bonds.
Our bullishness does not ignore the potential for interim volatility, nor the
possibility of a major market shock due to unforeseen developments. However,
there is a trade-off between pursuing high returns and positioning the fund to
weather market corrections.
For this reason, we have sought to keep the Portfolio's weighted price/earnings
ratio at a reasonable level and have substantially increased diversification.
We see nothing inconsistent in being bullish and yet acting with this extra
degree of caution which we recognize might lead to modest underperformance in
the current bull market. Admittedly, this "insurance" is unlikely to allow the
portfolio to escape a downturn unscathed, but it will help dampen the effects
of a market decline.
We appreciate your investment in the FMA - Large Capitalization Growth
Portfolio and look forward to reporting further developments in the future.
Sincerely,
Alden M. Stewart
President
John A. Koltes
Vice President and Portfolio Manager
1
TEN LARGEST HOLDINGS FIDUCIARY MANAGEMENT ASSOCIATES -
SEPTEMBER 30, 1996 LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
COMPANY VALUE PERCENT OF NET ASSETS
- -------------------------------------------------------------------------
Intel Corp. $ 753,956 6.4%
Norwest Corp. 645,825 5.5
Hewlett-Packard Co. 624,000 5.3
Federal National Mortgage Assn. 603,337 5.1
Walt Disney Co. 532,350 4.5
Merrill Lynch & Co., Inc. 492,188 4.2
Microsoft Corp. 461,562 3.9
Merck & Co., Inc. 457,437 3.9
General Electric Co. 436,800 3.7
Cisco Systems, Inc. 428,231 3.7
$5,435,686 46.2%
2
PORTFOLIO OF INVESTMENTS FIDUCIARY MANAGEMENT ASSOCIATES -
SEPTEMBER 30, 1996 LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-99.7%
CONSUMER PRODUCTS & SERVICES-38.6%
AIRLINES-1.2%
Northwest Airlines Corp. Cl.A (a) 4,000 $ 141,500
BEVERAGES-5.0%
Coca-Cola Co. 6,800 345,950
PepsiCo, Inc. 8,500 240,125
------------
586,075
COSMETICS-2.7%
Gillette Co. 4,400 317,350
ENTERTAINMENT & LEISURE-5.6%
Time Warner, Inc. 3,400 131,325
Walt Disney Co. 8,400 532,350
------------
663,675
HOUSEHOLD PRODUCTS-4.8%
Colgate-Palmolive Co. 4,000 347,500
Johnson & Johnson Co. 4,300 220,375
------------
567,875
PRINTING & PUBLISHING-4.4%
Gannett, Inc. 4,500 316,687
Scripps E. W. Co. 4,300 200,488
------------
517,175
RESTAURANTS & LODGING-7.1%
Marriot International, Inc. 3,200 176,400
McDonald's Corp. 6,900 326,887
Wrigley (Wm) Jr. Co. 5,500 331,375
------------
834,662
RETAILING-4.7%
Home Depot, Inc. 6,500 369,688
Wal-Mart Stores, Inc. 6,800 179,350
------------
549,038
TOBACCO-3.1%
Philip Morris Cos., Inc. 4,100 367,975
------------
4,545,325
TECHNOLOGY-29.7%
COMPUTER HARDWARE-7.5%
COMPAQ Computer Corp. (a) 4,100 262,912
Hewlett-Packard Co. 12,800 624,000
------------
886,912
COMPUTER SOFTWARE & SERVICES-10.4%
Cisco Systems, Inc. (a) 6,900 428,231
Electronic Data Systems Corp. 1,700 104,338
First Data Corp. 1,900 155,088
Microsoft Corp. (a) 3,500 461,562
Oracle Systems Corp. (a) 1,700 72,356
------------
1,221,575
ELECTRICAL EQUIPMENT-3.7%
General Electric Co. 4,800 436,800
SEMI-CONDUCTORS & RELATED-6.4%
Intel Corp. 7,900 753,956
TELECOMMUNICATIONS-1.7%
LIN Television Corp. (a) 4,000 164,000
Tele-Communications - Liberty Media Cl. A (a) 1,100 31,488
------------
195,488
------------
3,494,731
FINANCIALSERVICES-20.4%
BANKS-5.5%
Norwest Corp. 15,800 645,825
BROKERAGE & MONEY MANAGEMENT-4.2%
Merrill Lynch & Co., Inc. 7,500 492,188
3
FIDUCIARY MANAGEMENT ASSOCIATES -
PORTFOLIO OF INVESTMENTS (CONTINUED) LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
FINANCE-9.1%
Citicorp 2,200 $ 199,375
Federal National Mortgage Assn. 17,300 603,337
MBNA Corp. 7,700 267,575
------------
1,070,287
INSURANCE-1.6%
American International Group, Inc. 1,900 191,425
------------
2,399,725
HEALTH CARE-11.0%
DRUGS-11.0%
Abbott Laboratories 4,000 197,000
Amgen, Inc. (a) 6,700 422,938
Merck & Co., Inc. 6,500 457,437
Schering-Plough Corp. 3,500 215,250
------------
1,292,625
TOTAL INVESTMENTS-99.7%
(cost $10,480,043) 11,732,406
Other assets less liabilities-0.3% 37,085
NET ASSETS-100% $11,769,491
(a) Non-income producing security.
See notes to financial statements.
4
STATEMENT OF ASSETS AND LIABILITIES FIDUCIARY MANAGEMENT ASSOCIATES -
SEPTEMBER 30, 1996 LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $10,480,043) $11,732,406
Cash 31,392
Dividends receivable 23,383
Total assets 11,787,181
LIABILITIES
Accrued expenses 17,690
Total liabilities 17,690
NET ASSETS $11,769,491
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 10,826
Additional paid-in capital 10,322,679
Undistributed net investment income 54,582
Accumulated net realized gain 129,041
Net unrealized appreciation of investments 1,252,363
$11,769,491
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(based on 1,082,597 shares of beneficial interest outstanding) $10.87
See notes to financial statements.
5
STATEMENT OF OPERATIONS FIDUCIARY MANAGEMENT ASSOCIATES -
MAY 2, 1996* TO SEPTEMBER 30, 1996 LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Dividends $ 92,676
Interest 30,580 $ 123,256
EXPENSES
Advisory fee 49,598
Custodian 14,592
Audit and legal 10,260
Trustees' fees 8,056
Transfer agency 2,432
Miscellaneous 456
Total expenses 85,394
Less: expenses waived and assumed by adviser
(See Note B) (16,720)
Net expenses 68,674
Net investment income 54,582
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 129,041
Net unrealized appreciation of investments 1,252,363
Net gain on investments 1,381,404
NET INCREASE IN NET ASSETS FROM OPERATIONS $1,435,986
STATEMENT OF CHANGES IN NET ASSETS
_______________________________________________________________________________
MAY 2, 1996*
TO
SEP. 30,1996
------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 54,582
Net realized gain on investments 129,041
Net unrealized appreciation of investments 1,252,363
Net increase in net assets from operations 1,435,986
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 10,333,405
Total increase 11,769,391
NET ASSETS
Beginning of period $ 100
End of period $11,769,491
* Commencement of operations.
See notes to financial statements.
6
NOTES TO FINANCIAL STATEMENTS FIDUCIARY MANAGEMENT ASSOCIATES -
SEPTEMBER 30, 1996 LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Fiduciary Management Associates - Large Capitalization Growth Portfolio (the
"Fund") which is a Massachusetts business trust, is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. Prior to commencement of operation on May 2, 1996 the Portfolio had no
operations other than the sale to Alliance Capital Management L.P. (the
"Adviser") of 10 shares of common stock for the aggregate amount of $100 on
April 18, 1996. The following is a summary of significant accounting policies
followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on national securities exchanges are valued at the
last reported sales price, or, if no sale occurred, at the mean of the bid and
ask price at the regular close of the New York Stock Exchange. Over-the-counter
securities not traded on national securities exchanges are valued at the mean
of the closing bid and asked price. Securities which mature in 60 days or less
are valued at amortized cost which approximates market value. Securities for
which current market quotations are not readily available (including
investments which are subject to limitations as to their sale) are valued at
their fair value as determined in good faith by the Board of Trustees. In
determining fair value, consideration is given to cost, operating, and other
financial data.
2. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Security transactions are accounted for on the date securities are
purchased or sold. Security gains and losses are determined on the identified
cost basis.
4. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
NOTE B: ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser"), an advisory fee at an annual rate of
.65% of the average daily net assets of the Fund. The Adviser has agreed, under
the terms of the Investment Advisory Agreement, to reimburse the Fund to the
extent that its aggregate expenses (excluding interest, taxes, brokerage and
extraordinary expenses) exceed the limits prescribed by any state in which the
Fund's shares are qualified for sale. The Fund believes that the most
restrictive expense limitation imposed by any state is 2.5% of the first $30
million of its average daily net assets, 2% of the next $70 million of its
average daily net assets and 1.5% of its average daily net assets in excess of
$100 million. The Adviser voluntarily agreed to reimburse the Fund for the
period ended September 30, 1996 for expenses exceeding .90 of 1% of its average
daily net assets. For the period ended September 30, 1996, the reimbursement
amounted to $16,720.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) for providing personnel and facilities to perform transfer agency
services for the Fund. Such compensation amounted to $2,432 for the period
ended September 30, 1996.
Brokerage commissions paid on securities transactions for the period ended
September 30, 1996 amounted to $30,255, none of which was paid to affiliated
brokers.
7
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIDUCIARY MANAGEMENT ASSOCIATES - LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. Government securities) aggregated $20,261,067 and $9,910,065,
respectively, for the period ended September 30, 1996. At September 30, 1996,
the cost of securities for federal income tax purposes was $10,483,684.
Accordingly, gross unrealized appreciation of investments was $1,363,760 and
gross unrealized depreciation of investments was $115,038 resulting in net
unrealized appreciation of $1,248,722.
NOTE D: SHARES OF BENEFICIAL INTEREST
There is an unlimited number of $0.01 par value shares of beneficial interest
authorized. Transactions in shares were as follows:
SHARES AMOUNT
------------- ------------
MAY 2,1996* MAY 2,1996*
TO TO
SEP. 30, 1996 SEP. 30,1996
------------- ------------
Shares sold 2,080,984 $20,982,499
Shares issued in reinvestment of distributions -0- -0-
Shares redeemed (998,387) (10,649,094)
Net increase 1,082,597 $10,333,405
* Commencement of operations.
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FIDUCIARY MANAGEMENT ASSOCIATES -
FINANCIAL HIGHLIGHTS LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT THE
PERIOD
MAY 2,1996(A)
TO
SEP. 30,1996
--------------
Net asset value, beginning of period $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .05
Net realized and unrealized gain on investments .82
Net increase in net asset value from operations .87
Net asset value, end of period $10.87
TOTAL RETURN
Total investment return based on net asset value (b) 8.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $11,769
Ratios of average net assets of:
Expenses, net of waivers/reimbursements .90%(c)
Expenses, before waivers/reimbursements 1.12%(c)
Net investment income .72%(c)
Portfolio turnover rate 60%
Average commission rate (d) $.0641
(a) Commencement of operations.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period.
(c) Annualized.
(d) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged.
9
REPORT OF ERNST & YOUNG LLP FIDUCIARY MANAGEMENT ASSOCIATES -
INDEPENDENT AUDITORS LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES FIDUCIARY MANAGEMENT ASSOCIATES-LARGE
CAPITALIZATION GROWTH PORTFOLIO
We have audited the accompanying statement of assets and liabilities of
Fiduciary Management Associates-Large Capitalization Growth Portfolio,
including the portfolio of investments, as of September 30 1996, and the
related statement of operations, the statement of changes in net assets, and
the financial highlights for the period from May 2, 1996 (commencement of
operations) to September 30, 1996. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1996, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Fiduciary Management Associates-Large Capitalization Growth Portfolio at
September 30, 1996 and the results of its operations, the changes in its net
assets, and the financial highlights for the period from May 2, 1996 to
September 30, 1996, in conformity with generally accepted accounting principles.
New York, New York
November 1, 1996
10
FIDUCIARY MANAGEMENT ASSOCIATES -
LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
BOARD OF TRUSTEES
JOHN D. CARIFA, CHAIRMAN
RUTH BLOCK (1)
DAVID H. DIEVLER (1)
JOHN H. DOBKIN (1)
WILLIAM H. FOULK, JR. (1)
DR. JAMES M. HESTER (1)
CLIFFORD L. MICHEL (1)
DONALD J. ROBINSON (1)
OFFICERS
ALDEN M. STEWART, PRESIDENT
THOMAS BARDONG, VICE PRESIDENT
RANDALL E. HAASE, VICE PRESIDENT
JOHN A. KOLTES, VICE PRESIDENT
DANIEL V. PANKER, VICE PRESIDENT
TIMOTHY D. RICE, VICE PRESIDENT
PAUL ULLMAN, VICE PRESIDENT
PATRICIA YOUNG, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
VINCENT S. NOTO, CONTROLLER
CUSTODIAN
STATE STREET BANK & TRUST COMPANY
225 Franklin Street
Boston, MA 02110
DISTRIBUTOR
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-free 1-(800) 221-5672
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY 10019
(1) Member of the Audit Committee.
11
