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[LOGO APPEARS HERE]
FIRST MUTUAL FUNDS
SEMI-ANNUAL REPORT
January 15, 1996
Dear Shareholder:
I am pleased to provide you with the Trust's semi-annual report for the
period ended December 31, 1995. We experienced an exciting year of growth with
the Trust realizing appreciation of 45.9% for the twelve month period. While
the markets have performed well, it should be noted that the Trust has
outperformed the S & P 500 consistently for the past twelve months. For the
period December 31, 1994 through December 31, 1995, the price of the Trust
increased from $8.32 to $11.21, which included a distribution of $.925 which
was paid in December. The Trust's average total return since inception and for
the one, three and five year periods ending December 31, 1995 are 14.05%,
45.90%, 12.58% and 12.97%, respectively.
Last year the stock market's return exceeded its historical norm as
corporate profits continued to rise and interest rates declined over 100 basis
points. The good news is that corporate cash flows should continue to rise.
Because of this trend, it is our view that in 1996 investors will see more
share buy backs, higher dividend payments and increased merger and acquisition
activity.
We expect that the markets will be less generous in 1996. Therefore we
continue to look to protecting our profits and will adhere strictly to our buy
and sell disciplines. One major piece of the puzzle this year will be knowing
when to sell the "winners" of the previous year. Stable growth in our top
holdings such as Citicorp, HFS Systems (formerly Hospitality Franchise
Systems), Philip Morris Companies and Biochem Pharmaceutical contributed to the
excellent performance of the Trust this year.
The Trust will continue to be managed in a prudent manner. Our investment
philosophy remains; that a portfolio of diversified growth companies, properly
balanced with a valuation discipline and an eye to risk aversion will provide
above average returns over a full market cycle. We thank you again for your
support of First Mutual Funds and look forward to providing you with a
portfolio which meets your investment needs.
Cordially,
/s/ David P. Como
David P. Como
President
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SCHEDULE OF INVESTMENTS (UNAUDITED) DECEMBER 31, 1995
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<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------- -----------
<C> <S> <C>
COMMON STOCKS - 100.05%
CHEMICALS - 8.58%
30,000 First Mississippi Corp. ................................. $ 795,000
20,000 IMC Global, Inc. ........................................ 817,500
15,000 Morton International, Inc. .............................. 538,125
-----------
2,150,625
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COMPUTER-PERIPHERAL/GRAPHICS - 1.64%
15,000 Silicon Graphics, Inc.*.................................. 412,500
-----------
DIVERSIFIED OPERATIONS - 3.67%
10,000 Allied Signal, Inc. ..................................... 475,000
10,000 American Brands, Inc. ................................... 446,250
-----------
921,250
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ELECTRICAL-CONTROL INSTRUMENTS - 2.02%
22,800 Perceptron, Inc.*........................................ 507,300
-----------
ELECTRICAL-INSTRUMENTATION - 2.59%
12,500 Thermo Electron Corp.*................................... 650,000
-----------
ELECTRICAL-SEMI CONDUCTORS - 3.21%
32,000 Continental Circuits Corp.*.............................. 520,000
5,000 Motorola, Inc. .......................................... 285,000
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805,000
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FINANCIAL INSTITUTIONS - 9.39%
10,000 Bank of Boston Corp. .................................... 462,500
5,000 Citicorp................................................. 336,250
10,000 First USA, Inc. ......................................... 443,750
25,000 Insignia Financial Group, Inc. Cl A*..................... 962,500
10,000 ISB Financial Corp. ..................................... 150,000
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2,355,000
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FOOD PRODUCTS - 2.22%
16,800 Heinz (H.J.) Co. ........................................ 556,500
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</TABLE>
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SCHEDULE OF INVESTMENTS (UNAUDITED) DECEMBER 31, 1995
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<TABLE>
<CAPTION>
MARKET
SHARES VALUE
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<C> <S> <C>
GOLD - 1.89%
21,253 Firstmiss Gold, Inc.*.................................... $ 472,879
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LEISURE-GAMES/HOBBY - 1.30%
10,000 Ride Snowboard Co.*...................................... 326,250
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LEISURE-HOTELS/MOTELS - 4.89%
15,000 Hospitality Franchise Systems, Inc.*..................... 1,226,250
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MACHINERY-DIVERSIFIED - 1.87%
10,000 York International Corp. ................................ 470,000
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MACHINERY-METAL - 1.26%
40,000 Medar, Inc.*............................................. 315,000
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MEDIA-RADIO/TV - 6.66%
30,000 American Radio Systems Corp.*............................ 840,000
17,500 Viacom, Inc. Cl B*....................................... 829,063
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1,669,063
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MEDIA-NEWSPAPERS - 2.03%
15,000 Times Mirror Co., Cl A................................... 508,125
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MEDICAL-BIOMED-GENETICS - 3.60%
22,500 Biochem Pharma, Inc.*.................................... 902,813
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MEDICAL-NURSING HOMES - 0.52%
10,000 Assisted Living Concepts, Inc.*.......................... 131,250
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MEDICAL-PRODUCTS/SUPPLY - 5.78%
20,000 Angeion Corp.*........................................... 170,000
20,000 ATS Medical, Inc.*....................................... 185,000
10,000 ATS Medical, Inc. Warrants*.............................. 9,375
10,000 Boston Scientific Corp.*................................. 490,000
10,000 Guidant Corp. ........................................... 422,500
15,000 Sano Corp.*.............................................. 172,500
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1,449,375
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MINING - 1.41%
5,000 Potash Corp. ............................................ 354,375
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</TABLE>
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SCHEDULE OF INVESTMENTS (UNAUDITED) DECEMBER 31, 1995
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<TABLE>
<CAPTION>
MARKET
SHARES VALUE
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<C> <S> <C>
OIL & GAS - 5.90%
15,000 Occidental Petroleum Corp. .............................. $ 320,625
15,000 Petroleum Geo-Services ADRs*............................. 375,000
10,000 Texaco, Inc. ............................................ 785,000
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1,480,625
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OIL & GAS-EXPLORATION & PRODUCTS - 7.47%
100,000 Abacan Resource Corp.*................................... 268,750
50,000 Belden & Blake Corp.*.................................... 875,000
25,000 Cairn Energy USA, Inc.*.................................. 350,000
50,000 Queen Sand Resources, Inc.*.............................. 200,000
15,000 Swift Energy Co.*........................................ 180,000
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1,873,750
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PUBLISHING-NEWS - 1.18%
15,000 Harte Hanks Communications, Inc. ........................ 296,250
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RETAIL-DEPARTMENT STORES - 4.33%
22,000 Federated Department Stores, Inc.*....................... 605,000
20,000 Strawbridge & Clothier Cl A.............................. 480,000
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1,085,000
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RETAIL-MAIL ORDER - 3.06%
22,500 CUC International, Inc.*................................. 767,812
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TELECOMMUNICATIONS EQUIPMENT - 4.17%
15,000 AirTouch Communications, Inc.*........................... 423,750
10,000 Glenayre Technologies, Inc.*............................. 622,500
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1,046,250
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TELECOMMUNICATIONS SERVICES - 2.81%
20,000 Worldcom, Inc. .......................................... 705,000
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TEXTILE-APPAREL MANUFACTURING - 2.99%
30,000 Warnaco Group, Inc. Cl A................................. 750,000
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</TABLE>
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SCHEDULE OF INVESTMENTS (UNAUDITED) DECEMBER 31, 1995
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<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------- -----------
<C> <S> <C>
TOBACCO - 3.61%
10,000 Philip Morris Companies, Inc. .......................... $ 905,000
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TOTAL COMMON STOCKS (COST $19,161,341) - 100.05%........ 25,093,242
-----------
TOTAL INVESTMENTS (COST $19,161,341**) - 100.05%........ 25,093,242
OTHER LIABILITIES LESS OTHER ASSETS - (0.05)%........... (12,568)
-----------
NET ASSETS - 100.00%.................................... $25,080,674
===========
*Non-income producing security
**Cost for Federal income tax purposes is $19,161,341 and net unrealized
appreciation consists of:
Gross unrealized appreciation........................... $ 6,208,320
Gross unrealized depreciation........................... (276,419)
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Net unrealized appreciation............................. $ 5,931,901
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</TABLE>
The notes to the financial statements are an integral part of these statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995 (UNAUDITED)
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<TABLE>
<S> <C>
ASSETS
Investments in securities at market value
(identified cost $19,161,341) (Note 1)........................... $25,093,242
Cash.............................................................. 452,766
Receivables:
Dividends........................................................ 28,902
Investment securities sold....................................... 291,690
Capital stock sold............................................... 250
Other assets...................................................... 16,406
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TOTAL ASSETS..................................................... 25,883,256
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LIABILITIES
Payable for investment securities purchased....................... 572,863
Distributions payable............................................. 205,228
Accrued expenses.................................................. 24,491
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TOTAL LIABILITIES................................................ 802,582
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NET ASSETS
(applicable to outstanding shares of 2,238,043; unlimited shares
of $0.001 par value authorized).................................. $25,080,674
===========
Net asset value, offering and redemption price per share
($25,080,674 / 2,238,043)........................................ $ 11.21
===========
SOURCE OF NET ASSETS
Paid-in capital................................................... $18,188,688
Accumulated net realized gain on investments...................... 960,085
Net unrealized appreciation of investments........................ 5,931,901
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NET ASSETS....................................................... $25,080,674
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</TABLE>
The notes to financial statements are an integral part of these statements.
<PAGE>
STATEMENT OF OPERATIONS
DECEMBER 31, 1995 (UNAUDITED)
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<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends.......................................................... $ 125,637
Interest........................................................... 6,398
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TOTAL INCOME...................................................... 132,035
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EXPENSES
Advisory fees (Note 3)............................................. 85,490
Distribution expense (Note 3)...................................... 28,497
Administrator expense.............................................. 20,885
Transfer agent fees................................................ 17,054
Bookkeeping and pricing............................................ 11,967
Insurance expense.................................................. 8,854
Custodian fees..................................................... 8,514
Legal expense...................................................... 5,976
Registration expense............................................... 5,935
Independent accountants............................................ 5,844
Other.............................................................. 3,726
Trustees' fees and expenses........................................ 2,792
Reports to shareholders............................................ 1,978
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TOTAL EXPENSES.................................................... 207,512
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NET INVESTMENT LOSS............................................... (75,477)
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REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions....................... 2,332,288
Net change in unrealized appreciation of investments............... 2,083,676
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Net realized and unrealized gain on investments.................... 4,415,964
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Net increase in net assets resulting from operations............... $4,340,487
==========
</TABLE>
The notes to financial statements are an integral part of these statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
DECEMBER 31, ENDED
1995 JUNE 30,
(UNAUDITED) 1995
------------ -----------
<S> <C> <C>
OPERATIONS
Net investment loss................................. $ (75,477) $ (144,069)
Net realized gain on investments.................... 2,332,288 555,050
Net change in unrealized appreciation of invest-
ments.............................................. 2,083,676 3,822,245
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Net increase in net assets resulting from opera-
tions.............................................. 4,340,487 4,233,226
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DISTRIBUTIONS TO SHAREHOLDERS
Distributions from realized gains on investments
($0.9235 and $0.1877 per share, respectively)...... (1,927,263) (406,887)
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(1,927,263) (406,887)
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CAPITAL SHARE TRANSACTIONS
Receipt from shares sold............................ 1,193,469 2,464,698
Receipt from shares issued on reinvestment of dis-
tributions......................................... 1,722,035 369,927
Shares redeemed..................................... (529,432) (7,825,757)
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Net increase (decrease) in net assets resulting from
capital share transactions (a)..................... 2,386,072 (4,991,132)
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Total Increase (Decrease) in Net Assets............ 4,799,296 (1,164,793)
NET ASSETS
Beginning of year................................... 20,281,378 21,446,171
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End of year......................................... $25,080,674 $20,281,378
=========== ===========
(a)Transactions in capital stock were:
Shares sold........................................ 108,430 279,383
Shares issued on reinvestment of distributions..... 154,859 46,299
Shares redeemed.................................... (48,202) (914,197)
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Net increase (decrease)............................ 215,087 (588,515)
Beginning balance.................................. 2,022,956 2,611,471
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Ending balance..................................... 2,238,043 2,022,956
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</TABLE>
The notes to financial statements are an integral part of these statements.
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FINANCIAL HIGHLIGHTS
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The table below sets forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEARS ENDED JUNE 30,
1995 -------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR...... $10.03 $8.21 $9.29 $8.49 $9.24 $9.30
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income.. 0.04 (0.09) (0.09) (0.06) 0.01 0.03
Net gains (losses) on
securities (both
realized and
unrealized)........... 2.06 2.10 (0.13) 1.09 (0.09) 0.31
------- ------- ------- ------- ------- -------
Total from investment
operations........... 2.10 2.01 (0.22) 1.03 (0.08) 0.34
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends
(from net investment
income)............... 0.00 0.00 0.00 0.00 (0.02) (0.06)
Distributions
(from capital gains).. (0.92) (0.19) (0.86) (0.23) (0.65) (0.34)
------- ------- ------- ------- ------- -------
Total distributions... (0.92) (0.19) (0.86) (0.23) (0.67) (0.40)
------- ------- ------- ------- ------- -------
NET ASSET VALUE,
END OF YEAR........... $11.21 $10.03 $8.21 $9.29 $8.49 $9.24
======= ======= ======= ======= ======= =======
TOTAL RETURN............ 45.93% /1/ 25.04% (3.91%) 12.17% (1.01%) 4.35%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in 000's)..... $25,081 $20,281 $21,446 $19,093 $18,143 $16,606
Ratio of expenses to
average net assets
**.................... 1.80% /1/ 2.16% 1.97% 1.99% 1.87% 2.32%
Ratio of net investment
income to average net
assets **............. (0.65%)/1/ (0.77%) (0.97%) (0.61%) 0.08% 0.36%
Portfolio turnover
rate.................. 56% /1/ 198% 178% 172% 175% 178%
</TABLE>
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** Average net assets have been computed on the basis of the value of the net
assets at the end of the month.
/1/ Annualized
The notes to financial statements are an integral part of these financial
statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 1995
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NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940, as amended,
as an open-ended, diversified management company. The Trust's primary
investment objective is to seek capital appreciation principally through
investments in common stock. The Trust may also invest in securities
convertible into common stock such as convertible bonds or preferred stock.
Its secondary investment objective is to seek income from dividends and
interest. Because of the risks inherent in any investment program, the Trust
cannot ensure that its investment objectives will be realized. The following
is a summary of significant accounting policies consistently followed by the
Trust in the preparation of its financial statements. The policies are in
conformity with 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 on the last
business day of the period. Unlisted securities, or listed securities in which
there were no sales, are valued at the mean of the closing bid and ask prices.
Short-term obligations with remaining maturities of 60 days or less are valued
at cost plus accrued interest which approximates market value.
B. OTHER. As is common in the industry, 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 and
distributions to shareholders are reported on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Distributions are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles.
C. NET ASSET VALUE PER SHARE. Net asset value per share of the capital stock
of the Trust is determined daily as of the close of trading on the New York
Stock Exchange by dividing the value of its net assets by the number of Trust
shares outstanding. The offering price and redemption price per share is the
same as the net asset value per share.
D. FEDERAL INCOME TAXES. It is the policy of the Trust to comply with
requirements of the Internal Revenue Code applicable to regulated investment
companies, if such qualification is in the best interest of its stockholders,
and to make distributions of net investment income and capital gains (after
reduction for any amounts available for federal income tax purposes as capital
loss carryovers) sufficient to relieve it from all, or substantially all,
federal income taxes.
E. USE OF ESTIMATES IN FINANCIAL STATEMENTS. In preparing financial statements
in conformity with generally accepted accounting principles, management makes
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 income and expenses during the reporting period. Actual results may
differ from these estimates.
NOTE 2 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term investments,
aggregated $13,267,922 and $12,682,739 respectively, for the six months ended
December 31, 1995.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 1995
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NOTE 3 - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Trainer, Wortham & Co., Inc. (the "Advisor") is the investment advisor for the
Trust pursuant to an investment advisory agreement (the "Agreement") effective
October 31, 1991. Under the terms of the Agreement, the Advisor receives an
annual fee, accrued daily and paid quarterly, of 0.75% on the first
$40,000,000 of the average daily net assets of the Trust and 0.50% on average
daily net assets over $40,000,000.
For the six months ended December 31, 1995, the Trust paid the Advisor $85,490
in advisory fees. The Trust has adopted a Distribution Plan (the "Plan"),
effective October 31, 1991, pursuant to Rule 12b-1 under the Investment
Company Act of 1940, which permits the Trust to pay certain expenses
associated with the distribution of its shares. The Plan provides that the
Trust will reimburse Fund/Plan Broker Services, Inc. (the "Distributor"), the
Trust'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 Trust's average daily net assets. For the six
months ended December 31, 1995, the Trust reimbursed the Distributor $28,497
for distribution costs incurred.
Certain officers and trustees of the Trust are affiliated persons of the
Advisor.
FIRST MUTUAL FUNDS
1 East Putnam Avenue, 3rd Floor
Greenwich, CT 06830
OFFICERS
David P. Como, President
H. Williamson Ghriskey, Jr. Vice President
Secretary/Treasurer
LEGAL COUNSEL
Stradley, Ronon, Stevens, & Young
2600 One Commerce Square
Philadelphia, PA 19103
CUSTODIAN United
Missouri Bank KC, NA
P.O. Box 412797
Kansas City, MO 64141-2797
INVESTMENT ADVISOR
Trainer, Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
AUDITORS
Tait, Weller & Baker
Two Penn Center Plaza, Suite
700 Philadelphia, PA 19102
FUND ADMINISTRATION
Fund/Plan Services, Inc.
P.O. Box 874
Conshohocken, PA 19428
This report is submitted for the general information of the shareholders of
the Trust. It is not authorized for distribution to prospective investors in
the Trust unless preceded or accompanied by an effective Prospectus which
includes details regarding the Trust's objectives, policies, expenses and
other information.
<PAGE>
SEMI-ANNUAL REPORT
DECEMBER 31, 1995
TRUSTEES:
Robert H. Breslin, Jr.
David P. Como
Raymond Eisenberg
David Elias
Robert S. Lazar
Martin S. Levine
Therese C. Thibadeau
James F. Twaddell
[LOGO APPEARS HERE]
800-257-4414
FOR ADDITIONAL INFORMATION OR A PROSPECTUS PLEASE CALL:
First Mutual Funds
1 East Putnam Avenue
3rd Floor
Greenwich, CT 06830
