FIDUCIARY MANAGEMENT ASSOCIATES - LARGE CAPITALIZATION GROWTH PORTFOLIO
500 PLAZA DRIVE, SECAUCUS, NJ 07094, (201) 319-4000
SEMI-ANNUAL REPORT
MARCH 31, 1997
(UNAUDITED)
LETTER TO SHAREHOLDERS
FIDUCIARY MANAGEMENT ASSOCIATES - LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
May 9, 1997
Dear Shareholder:
We are pleased to provide the first semi-annual report for the Fiduciary
Management Associates--Large-Capitalization Growth Portfolio. Shown below are
the Portfolio's total returns from inception (May 2, 1996) through March 31,
1997. 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.
INVESTMENT RETURNS
TOTAL RETURNS
FOR PERIODS ENDED MARCH 31, 1997
SINCE INCEPTION
6-MONTHS (MAY 2, 1996)
------------- ----------------
FMA - LARGE-CAP PORTFOLIO 11.75% 23.83%
S&P 500 STOCK INDEX 11.24% 19.82%
THE S&P 500 IS UNMANAGED.
MARKET REVIEW
In 1994, the Federal Reserve engaged in a steady stream of rate increases and
spoiled the party for the bond and equity markets. By their action at that time
the Fed checked any budding inflationary tendencies and helped control
subsequent gross domestic product (GDP) growth within a manageable 2% to 3%
range. This laid the groundwork for the excellent stock market experience of
1995 and 1996.
We believe that the market has learned nothing from this experience. It seems
to us that the Fed is once more doing exactly the right thing, i.e. raising
rates, if the so-called new paradigm of moderate growth and moderate inflation
is to be extended towards the next century. Yet, the markets have the jitters.
Certainly, with the market's price earnings multiple now at 17 times earnings,
we do not want to suggest that the equity markets will repeat the pace of
advance seen since 1994. But, with hindsight, we can see that good earnings
gains, in concert with low inflation, have justified such a market climb, and
this combination continues to underpin current valuations.
We see no fundamental reason for equities not continuing to provide an
acceptable average annual return (approximately 10% or slightly greater) in the
period ahead. Equally important, we will be very disappointed if there is any
pullback greatly exceeding 10% during this time frame unless the market goes
through a bout of euphoria in the interim. While we expect increased
volatility, we hope to take advantage of buying opportunities brought about by
market fluctuations. In addition, we will also be watching the strength of the
U.S. dollar, which will surely negatively impact the reported earnings of
certain companies.
INVESTMENT STRATEGY
We continue to keep between 25-30% of Portfolio assets in technology stocks.
Admittedly, we are not alone in extolling the virtues of such world leaders as
Intel and Microsoft. Nevertheless, we feel confident that such companies still
have their best days ahead of them as the world in the next century will be
driven even more by technologies that already permeate our daily lives.
Similarly, we feel that many premier financial growth companies with dominant
industry positions are relatively undervalued at present. We can envisage the
potential for such companies trading up to higher relative price/earnings
multiples and continue to hold approximately 20-25% of our portfolios in this
area as our second point of emphasis. Interestingly, if economic growth should
falter and interest rates come down, holdings in this sector could also prove
to be a useful portfolio counterpoint to some earnings disappointments
elsewhere.
Beyond these two groups, our selections cover a broad range of companies such
as Philip Morris and UAL, and drug stocks like Pfizer and Merck. Indeed, in
recognition of the mature nature of this bull market, we have been diversifying
more broadly among stocks than might normally be the case.
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
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TEN LARGEST HOLDINGS
MARCH 31, 1997 (UNAUDITED)
FIDUCIARY MANAGEMENT ASSOCIATES - LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
COMPANY VALUE PERCENT OF NET ASSETS
- ------------------------------------------------------------------------
Intel Corp. $1,043,437 6.9%
Microsoft Corp. 623,475 4.2
Walt Disney Co. 613,200 4.1
Norwest Corp. 587,375 3.9
Federal National Mortgage Assn. 549,100 3.7
Merck & Co., Inc. 547,625 3.7
General Electric Co. 456,550 3.1
Merrill Lynch & Co., Inc. 446,550 3.0
Coca-Cola Co. 424,650 2.8
Philip Morris Cos., Inc. 422,263 2.8
$5,714,225 38.2%
2
PORTFOLIO OF INVESTMENTS
MARCH 31, 1997 (UNAUDITED)
FIDUCIARY MANAGEMENT ASSOCIATES - LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-97.1%
CONSUMER PRODUCTS & SERVICES-38.2%
AIRLINES-2.4%
Northwest Airlines Corp. Cl.A Cl.A (a) 4,000 $ 150,500
UAL Corp. (a) 3,300 213,675
-----------
364,175
APPAREL-1.0%
Nike, Inc. Cl.B 2,300 142,600
BEVERAGES-3.8%
Coca-Cola Co. 7,600 424,650
PepsiCo, Inc. 4,500 146,813
-----------
571,463
COSMETICS-2.2%
Gillette Co. 4,600 334,075
ENTERTAINMENT & LEISURE-5.1%
Time Warner, Inc. 3,400 147,050
Walt Disney Co. 8,400 613,200
-----------
760,250
FOOD-1.3%
Campbell Soup Co. 4,000 185,500
HOUSEHOLD PRODUCTS-4.2%
Colgate-Palmolive Co. 4,000 398,500
Johnson & Johnson Co. 4,300 227,362
-----------
625,862
PRINTING & PUBLISHING-3.5%
Gannett, Inc. 4,500 386,437
Scripps E.W. Co. Cl.A 4,300 140,288
-----------
526,725
RESTAURANTS & LODGING-5.6%
Marriot International, Inc. 4,700 233,825
McDonald's Corp. 5,900 278,775
Wrigley (Wm) Jr. Co. 5,500 321,062
-----------
833,662
RETAILING-6.3%
Home Depot, Inc. 7,300 390,550
Kohl's Corp. (a) 4,500 190,688
Sears, Roebuck & Co. 1,500 75,375
Wal-Mart Stores, Inc. 10,300 287,112
-----------
943,725
TOBACCO-2.8%
Philip Morris Cos., Inc. 3,700 422,263
-----------
5,710,300
TECHNOLOGY-28.2%
COMPUTER HARDWARE-6.2%
COMPAQ Computer Corp. (a) 4,700 360,137
Dell Computer Corp. (a) 2,400 162,300
Hewlett-Packard Co. 7,700 410,025
-----------
932,462
COMPUTER SOFTWARE & SERVICES-7.7%
Cisco Systems, Inc. (a) 6,900 332,063
First Data Corp. 3,800 128,725
Microsoft Corp. (a) 6,800 623,475
Oracle Systems Corp. (a) 1,700 65,556
-----------
1,149,819
ELECTRICAL EQUIPMENT-3.1%
General Electric Co. 4,600 456,550
SEMI-CONDUCTORS & RELATED-7.0%
Intel Corp. 7,500 1,043,437
TELECOMMUNICATIONS-4.2%
AirTouch Communications, Inc. (a) 5,300 121,900
Comcast Corp. Cl.A 4,980 84,038
LIN Television Corp. (a) 4,600 166,750
Lucent Technologies, Inc. 2,000 105,500
Nokia Corp. (ADR) (b) 2,600 151,450
-----------
629,638
-----------
4,211,906
3
PORTFOLIO OF INVESTMENTS (CONTINUED)
FIDUCIARY MANAGEMENT ASSOCIATES - LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
FINANCIAL SERVICES-17.4%
BANKS-4.9%
First Bank System, Inc. 2,000 $ 146,000
Norwest Corp. 12,700 587,375
------------
733,375
BROKERAGE & MONEY MANAGEMENT-3.8%
Merrill Lynch & Co., Inc. 5,200 446,550
Morgan Stanley Group, Inc. 2,000 117,500
------------
564,050
FINANCE-7.8%
Citicorp 1,900 205,675
Federal National Mortgage Assn. 15,200 549,100
MBNA Corp. 14,750 411,156
------------
1,165,931
INSURANCE-0.9%
American International Group, Inc. 1,200 140,850
------------
2,604,206
HEALTH CARE-11.5%
DRUGS, HOSPITAL SUPPLIES & MEDICAL SERVICES-11.5%
Abbott Laboratories 4,500 252,563
Amgen, Inc. (a) 6,200 346,425
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
Medtronic, Inc. 2,400 $ 149,400
Merck & Co., Inc. 6,500 547,625
Pfizer, Inc. 1,600 134,600
Schering-Plough Corp. 4,000 291,000
------------
1,721,613
ENERGY-1.1%
OIL & GAS SERVICES-1.1%
Baker Hughes, Inc. 4,300 165,013
DIVERSIFIED-0.7%
Tyco International, Ltd. 2,000 110,000
Total Common Stocks
(cost $12,123,955) 14,523,038
COMMERCIAL PAPER-2.8%
Prudential Funding Corp.
6.76%, 4/01/97
(amortized cost $419,000) $419 419,000
TOTAL INVESTMENTS-99.9%
(cost $12,542,955) 14,942,038
Other assets less liabilities-0.1% 18,507
NET ASSETS-100% $14,960,545
(a) Non-income producing security
(b) Country of origin--Finland.
See notes to financial statements.
4
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997 (UNAUDITED)
FIDUCIARY MANAGEMENT ASSOCIATES - LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $12,542,955) $14,942,038
Cash 467
Dividends receivable 18,262
Receivable for investment securities sold 16,447
Total assets 14,977,214
LIABILITIES
Advisory fee payable 715
Accrued expenses 15,954
Total liabilities 16,669
NET ASSETS $14,960,545
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 12,500
Additional paid-in capital 12,315,743
Undistributed net investment income 20,122
Accumulated net realized gain 213,097
Net unrealized appreciation of investments 2,399,083
$14,960,545
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(based on 1,249,998 shares of beneficial interest outstanding) $11.97
See notes to financial statements.
5
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
FIDUCIARY MANAGEMENT ASSOCIATES - LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of dividend taxes withheld of $272) $ 80,361
Interest 4,898 $ 85,259
EXPENSES
Advisory fee 45,102
Custodian 29,886
Trustees' fees 10,500
Audit and legal 7,480
Printing 4,746
Transfer agency 912
Miscellaneous 1,988
Total expenses 100,614
Less: expenses waived and assumed by adviser
(See Note B) (38,164)
Net expenses 62,450
Net investment income 22,809
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 221,501
Net change in unrealized appreciation of investments 1,146,720
Net gain on investments 1,368,221
NET INCREASE IN NET ASSETS FROM OPERATIONS $1,391,030
See notes to financial statements.
6
STATEMENT OF CHANGES IN NET ASSETS
FIDUCIARY MANAGEMENT ASSOCIATES - LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
SIX MONTHS ENDED MAY 2,1996*
MARCH 31,1997 TO
(UNAUDITED) SEP. 30,1996
------------- ------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 22,809 $ 54,582
Net realized gain on investment transactions 221,501 129,041
Net change in unrealized appreciation of
investments 1,146,720 1,252,363
Net increase in net assets from operations 1,391,030 1,435,986
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (57,269) -0-
Net realized gain on investments (137,445) -0-
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 1,994,738 10,333,405
Total increase 3,191,054 11,769,391
NET ASSETS
Beginning of period 11,769,491 100
End of period (including undistributed net
investment income of $20,122) $14,960,545 $11,769,491
* Commencement of operations.
See notes to financial statements.
7
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997 (UNAUDITED)
FIDUCIARY MANAGEMENT ASSOCIATES - 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 operations on May 2, 1996 the Fund 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 are
required.
3. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. Investment 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 Advisor has agreed to
voluntarily waive its fees and bear certain expenses so that total expenses do
not exceed on an annual basis .90 of 1% of average net assets. For the six
months ended March 31, 1997, the reimbursement amounted to $38,164.
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. No such compensation was paid for the six months ended
March 31, 1997.
Broker commissions paid on securities transactions for the six months ended
March 31, 1997 amounted to $3,913, none of which was paid to affiliated brokers.
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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 $3,007,786 and $1,501,664,
respectively, for the six months ended March 31, 1997. There were no purchases
and $83,711 in sales of U.S. government or government agency obligations for
the six months ended March 31, 1997. At March 31, 1997, the cost of securities
for federal income tax purposes was $12,542,955. Accordingly, gross unrealized
appreciation of investments was $2,559,889 and gross unrealized depreciation of
investments was $160,806 resulting in net unrealized appreciation of $2,399,083.
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
--------------------------- ------------------------------
SIX MONTHS ENDED MAY 2,1996* SIX MONTHS ENDED MAY 2,1996*
MARCH 31,1997 TO MARCH 31,1997 TO
(UNAUDITED) SEP. 30,1996 (UNAUDITED) SEP. 30,1996
------------ ------------ -------------- --------------
Shares sold 152,107 2,080,984 $1,818,553 $ 20,982,499
Shares issued in
reinvestment of
dividends and
distributions 15,294 -0- 176,185 -0-
Shares redeemed -0- (998,387) -0- (10,649,094)
Net increase 167,401 1,082,597 $1,994,738 $ 10,333,405
* Commencement of operations.
9
FINANCIAL HIGHLIGHTS
FIDUCIARY MANAGEMENT ASSOCIATES - LARGE CAPITALIZATION GROWTH PORTFOLIO
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
SIX MONTHS ENDED MAY 2,1996(A)
MARCH 31,1997 TO
(UNAUDITED) SEP. 30,1996
-------------- -------------
Net asset value, beginning of period $10.87 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .02(b) .05
Net realized and unrealized gain on investments 1.25 .82
Net increase in net asset value from operations 1.27 .87
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.05) -0-
Distributions from net realized gains (.12) -0-
Total dividends and distributions (.17) -0-
Net asset value, end of period $11.97 $10.87
TOTAL RETURN
Total investment return based on net asset value (c) 11.75% 8.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $14,961 $11,769
Ratios of average net assets of:
Expenses, net of waivers/reimbursements (d) .90% .90%
Expenses, before waivers/reimbursements (d) 2.49% 1.12%
Net investment income (d) .33% .72%
Portfolio turnover rate 12% 60%
Average commission rate $.0534 $.0641
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
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.
(d) Annualized.
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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
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
THOMAS BARDONG, VICE PRESIDENT
RANDALL E. HAASE, VICE PRESIDENT
DANIEL V. PANKER, 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.
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