<PAGE> 1
TRAINER WORTHAM - Outlook 2000
Dear Fellow and Future Shareholders:
The Y2K scare came and went. Governments and corporations around the world spent
millions and millions to fix the computer glitch. The outcome resulted in few
computer failures and the world moves on. The first week of the year saw some
profit taking in the technology stocks and lots of heavy trading volume. So, the
question is where do we go from here?
The year 1999 was a tremendous year for the financial markets. Despite interest
rate fears and Y2K nerves the market climbed to new records. The NASDAQ was up a
record 85% in 1999. Coming into 2000, market valuations and specifically
technology and Internet valuations are higher than ever. Our view is that many
of these new technology businesses will succeed, but there will be companies
that do not grow to produce profits in the future to justify their current
valuations. We believe that spells volatility for the markets in 2000. Despite
expected swings in technology stocks, we believe the technology sector, which is
now 33% of GDP, simply cannot be ignored. We have to be invested in this sector
to capture the industry's growth. Our goal is to invest in industry leaders,
whose valuations are justified by strong business models and future growth.
We will continue to invest in technology, but we also intend to invest in
industries benefiting from the growth of technology and the Internet, but who do
not have technology valuations. One area that we feel strongly about is media
and broadcasting. Our confidence in this sector stems from the convergence of
old and new media and the positive advertising trends we see for the year.
The convergence of old and new media is best exemplified by the AOL (8.51% of
the Fund's net assets) and Time Warner (0%) announcement. The 'Old World' of
media is gone and the new combined company will be the third biggest company in
the world. This deal follows the 1999 CBS (0%) and Viacom (0%) merger and their
ventures into the Internet. NBC (0%) was not left on the sidelines from the new
media fever. They took their 60% ownership in Snap (with CNET (4.62%) owning the
rest), and merged it with Xoom to co-launch NBCi (0%) last fall. In addition,
CNET announced a radio deal with Clear Channel (4.92%) just last week.
The fuel behind the convergence of media is the growing cross-promotion through
TV, radio, film, cable, and the Internet. The same content, branding and
advertising can be disseminated through all of these forms of media. As a
result, advertising can be more effective, which has led to increased spending.
The media convergence and the large sums of "dot Com" advertising dollars imply
a strong year ahead for advertising spending, but there are also other driving
factors. Since 1970, advertising revenue is up on average 6-8% a year. 1976 saw
the Bicentennial, the Olympics, and a Presidential election. These events
dramatically impacted advertising spending, and triggered a 31% growth that
year. No year since has had comparable parameters until now. The year 2000 is
the year of the Millennium, the Olympics, and a Presidential election. We
believe that advertising spending this year should far exceed expectations.
These trends will benefit the old and new media companies. We will continue to
invest a small part of the portfolios in hyper-growth Internet and the new media
companies. But, we are also focusing our efforts in low enterprise value
multiple companies. Many of the traditional or old media companies have low
valuations on an enterprise value basis regardless of their entry into new
media. With CBS or Infinity (4.72%) or Clear Channel, an investor gets exposure
to the incredible growth of media through old medians and through the Internet,
but without Internet valuations.
The world is going through an incredible cycle of change created by the Internet
and technology. We intend to benefit from the growth of new industries, but also
to manage our risk and volatility by focusing on traditional business models
that are indirectly benefiting from the changing corporate world. We look
forward to the year ahead and will continue to focus our research on company
fundamentals and in growth industries.
Sincerely,
/s/ DAVID P. COMO
David P. Como, President
This material is to be preceded or accompanied by a prospectus. Shares of the
Trainer Wortham Funds are distributed by Provident Distributors, Inc. which is
not affiliated with the First Republic Bank and is not a bank. Trainer Wortham &
Co., Inc. is the investment advisor to the Funds, for which it receives a fee.
SHARES OF THE FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED OR OTHERWISE SUPPORTED BY, FIRST REPUBLIC BANK, ITS AFFILIATES, AND ARE
NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, FEDERAL DEPOSIT
INSURANCE CORPORATION, FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY.
INVESTMENT IN THE FUND INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
<PAGE> 2
TRAINER WORTHAM LARGE-CAP GROWTH FUND
THE PORTFOLIO
The Fund commenced operations on December 8, 1999. By the end of the year, the
net assets in the Fund amounted to $271,257 with 82 shareholders. The top ten
positions in order were: CMGI (5.10% of the Fund's net assets), BroadCom
(5.02%), Doubleclick (4.66%), Solectron (4.38%), General Electric (4.28%),
Liberty Media (4.18%), EMC Corp. (4.03%), IBM (3.98%), Qwest Communications
(3.96%), and Cisco Systems (3.95%). The sector weightings were as follows:
Technology 43.8%, Consumer Staples 16.1%, Communication Services 11.2%,
Healthcare 10.0%, Financials 9.9%, and Capital Goods 8.7%. The Fund outperformed
the S&P 500 Index from inception, December 8, 1999, through year-end: Large-Cap
Growth Fund rose 10.93% compared to S&P 500 Index of 4.66%.
OUTLOOK FOR 2000
As we begin the new millennium, the background for financial markets remains
bright, with strong economic growth, low unemployment and rising corporate
profits. Even with continued robust growth, the consensus expectation is that
inflation should remain subdued, primarily due to higher productivity generated
by improved technologies and to global competition, which severely limits the
ability of companies to raise their prices. Additionally, the markets continue
to look to Chairman Greenspan and the Federal Reserve to maintain their
vigilance against excessive growth and inflationary pressures in the economy.
While interest rates may continue to rise during the early part of this year,
with at least one more tightening by the Federal Reserve, we believe that
continued low inflation will bring long-term interest rates down near the 6%
level before year-end.
Corporate earnings growth should exceed 10% again this year, with technology and
telecommunications continuing to show the strongest rate of growth. While we
believe that there may be the inevitable shakeout in the Internet sector, we
also believe that it is essential to maintain an exposure to this new paradigm,
though we continue to be prudent as to valuation parameters. We still like the
financial services and media areas, both of which should produce solid growth
this year. We are also maintaining a decent exposure in healthcare, especially
in pharmaceuticals. While election year rhetoric may negatively impact near-term
results, we believe that the long-term growth potential of an aging population
combined with the dynamic advances in biotechnology make this an exciting area
of growth. As always, we continue to seek new investment ideas and are paying
particular attention to opportunities in the consumer area.
Respectfully,
/s/ Robert J. Vile
Robert J. Vile, CPA, CFA
Managing Director
Past performance is no guarantee of future results. Share prices will fluctuate
and you may have a gain or loss when you redeem shares.
The S&P 500 Index is an unmanaged index and, unlike a mutual fund, its
performance assumes no transaction costs, taxes, management fees or other
expenses. A direct investment in an index is not possible.
<PAGE> 3
TRAINER WORTHAM FIRST MUTUAL FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------- ------------
<C> <S> <C>
COMMON STOCK - 101.07%
COMPUTER SOFTWARE & SERVICES - 18.52%
76,100 America Online, Inc.*....................................... $ 5,740,794
55,000 CNET, Inc.*................................................. 3,121,250
41,000 Inktomi Corp.*.............................................. 3,638,750
------------
12,500,794
------------
DIVERSIFIED OPERATIONS - 4.60%
20,075 General Electric Co. ....................................... 3,106,606
------------
ELECTRONICS/MANUFACTURING - 16.65%
10,000 BroadCom Corp., Class A*.................................... 2,723,750
30,000 Sanmina Corp.*.............................................. 2,996,250
58,000 Solectron Corp.*............................................ 5,517,250
------------
11,237,250
------------
FINANCIAL - 7.54%
52,762 Citigroup, Inc. ............................................ 2,931,589
34,600 Federal National Mortgage Association....................... 2,160,338
------------
5,091,927
------------
MEDIA/BROADCASTING - 9.63%
37,175 Clear Channel Communications, Inc.*......................... 3,317,869
88,000 Infinity Broadcasting Corp., Class A*....................... 3,184,500
------------
6,502,369
------------
MEDICAL - PHARMACEUTICAL - 15.57%
76,350 Amgen, Inc.*................................................ 4,585,772
24,500 Johnson & Johnson........................................... 2,281,562
29,100 Merck & Co., Inc. .......................................... 1,951,519
127,400 NeoTherapeutics, Inc.*...................................... 1,688,050
------------
10,506,903
------------
TECHNOLOGY & COMPUTERS - 10.85%
30,100 Cisco Systems, Inc.*........................................ 3,224,462
33,600 Intel Corp. ................................................ 2,765,700
12,350 International Business Machines Corp. ...................... 1,333,800
------------
7,323,962
------------
TELECOMMUNICATIONS - 17.71%
44,200 Lucent Technologies, Inc. .................................. 3,306,713
52,500 MCI Worldcom, Inc.*......................................... 2,785,781
37,000 MediaOne Group, Inc.*....................................... 2,842,062
70,150 Qwest Communications International, Inc.*................... 3,016,450
------------
11,951,006
------------
The notes to financial statements are an integral part of these statements.
</TABLE>
<PAGE> 4
TRAINER WORTHAM FIRST MUTUAL FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
VALUE
------------
<C> <S> <C>
TOTAL INVESTMENTS (COST $34,226,898**) - 101.07%............ $ 68,220,817
OTHER LIABILITIES LESS OTHER ASSETS - (1.07)%............... (724,832)
------------
NET ASSETS - 100.00%........................................ $ 67,495,985
============
* Non-income producing security
** Cost for Federal income tax purposes is $34,226,898 and net unrealized appreciation
consists of:
Gross unrealized appreciation............................... $ 34,386,223
Gross unrealized depreciation............................... (392,304)
------------
Net unrealized appreciation................................. $ 33,993,919
============
</TABLE>
The notes to financial statements are an integral part of these statements.
<PAGE> 5
TRAINER WORTHAM LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------- ---------
<C> <S> <C>
COMMON STOCK - 99.25%
COMPUTER SOFTWARE & SERVICES - 20.50%
125 America Online, Inc.*....................................... $ 9,430
50 CMGI, Inc.*................................................. 13,844
50 Doubleclick, Inc.*.......................................... 12,653
100 EMC Corp.*.................................................. 10,925
75 Microsoft Corp.*............................................ 8,756
---------
55,608
---------
DIVERSIFIED OPERATIONS - 4.28%
75 General Electric Co. ....................................... 11,606
---------
ELECTRONICS/MANUFACTURING - 9.40%
50 BroadCom Corp., Class A*.................................... 13,619
125 Solectron Corp.*............................................ 11,891
---------
25,510
---------
FINANCIAL - 9.83%
50 American International Group, Inc. ......................... 5,406
100 Bank of America Corp. ...................................... 5,019
100 Citigroup, Inc. ............................................ 5,556
75 Morgan Stanley, Dean Witter & Co. .......................... 10,706
---------
26,687
---------
MEDIA/BROADCASTING - 15.90%
200 AT&T Corp. - Liberty Media Group, Class A*.................. 11,350
100 Clear Channel Communications, Inc.*......................... 8,925
175 Comcast Corp., Class A*..................................... 8,378
150 Infinity Broadcasting Corp., Class A*....................... 5,428
125 Time Warner, Inc. .......................................... 9,055
---------
43,136
---------
MEDICAL - PHARMACEUTICAL - 9.99%
175 Amgen, Inc.*................................................ 10,511
125 Merck & Co., Inc. .......................................... 8,383
100 Warner Lambert Co. ......................................... 8,194
---------
27,088
---------
TECHNOLOGY & COMPUTERS - 14.73%
100 Cisco Systems, Inc.*........................................ 10,712
200 Dell Computer Corp.*........................................ 10,200
100 Intel Corp. ................................................ 8,231
100 International Business Machines Corp. ...................... 10,800
---------
39,943
---------
The notes to financial statements are an integral part of these statements.
</TABLE>
<PAGE> 6
TRAINER WORTHAM LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ------- ---------
<C> <S> <C>
TELECOMMUNICATIONS - 14.62%
125 Lucent Technologies, Inc. .................................. $ 9,351
188 MCI Worldcom, Inc.*......................................... 9,949
125 MediaOne Group, Inc.*....................................... 9,602
250 Qwest Communications International, Inc.*................... 10,750
---------
39,652
---------
TOTAL COMMON STOCKS (COST $249,762)......................... 269,230
---------
TOTAL INVESTMENTS (COST $249,762**) - 99.25%................ 269,230
OTHER ASSETS LESS OTHER LIABILITIES - 0.75%................. 2,027
---------
NET ASSETS - 100.00%........................................ $ 271,257
=========
* Non-income producing security
** Cost for Federal income tax purposes is $249,762 and net unrealized appreciation
consists of:
Gross unrealized appreciation............................... $ 23,225
Gross unrealized depreciation............................... (3,757)
---------
Net unrealized appreciation................................. $ 19,468
=========
</TABLE>
The notes to financial statements are an integral part of these statements.
<PAGE> 7
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIRST LARGE-CAP
MUTUAL GROWTH
----------- ---------
<S> <C> <C>
ASSETS
Investments in securities at market value (identified cost
$34,226,898 and $249,762 respectively) (Note 1)......... $68,220,817 $269,230
Cash...................................................... -- 16,556
Receivables:
Dividends and interest.................................. 20,400 210
Capital stock sold...................................... 100,120 1,000
Reimbursement due from Advisor............................ -- 14,336
Other assets.............................................. 4,768 --
----------- --------
TOTAL ASSETS............................................ 68,346,105 301,332
----------- --------
LIABILITIES
Payables:
Investment securities purchased......................... 234,039 16,065
Capital stock redeemed.................................. 487,538 --
Advisory fee............................................ 42,508 --
Distribution fee........................................ 14,169 29
Due to custodian........................................ 42,798 --
Accrued expenses.......................................... 29,068 13,981
----------- --------
TOTAL LIABILITIES....................................... 850,120 30,075
----------- --------
NET ASSETS
(applicable to outstanding shares of 3,458,277 and 25,062
respectively; unlimited shares of $0.001 par value
authorized)............................................. $67,495,985 $271,257
=========== ========
Net asset value, offering and redemption price per
share................................................... $ 19.52 $ 10.82
=========== ========
SOURCE OF NET ASSETS
Paid-in capital........................................... $33,227,618 $251,753
Undistributed net investment income (loss)................ (317,887) 36
Accumulated net realized gain on investments.............. 592,335 --
Net unrealized appreciation of investments................ 33,993,919 19,468
----------- --------
NET ASSETS.............................................. $67,495,985 $271,257
=========== ========
</TABLE>
The notes to financial statements are an integral part of these statements.
<PAGE> 8
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIRST LARGE-CAP
MUTUAL GROWTH*
----------- ---------
<S> <C> <C>
INVESTMENT INCOME
Dividends................................................. $ 99,447 $ 21
Interest.................................................. 33,492 189
----------- -------
TOTAL INCOME............................................ 132,939 210
----------- -------
EXPENSES
Advisory fees (Note 3).................................... 218,826 87
Distribution expense (Note 3)............................. 72,942 29
Administrator expense..................................... 39,614 5,313
Transfer agent fees....................................... 25,902 3,070
Bookkeeping and pricing................................... 24,213 1,446
Insurance expense......................................... 6,056 --
Custodian fees............................................ 6,693 721
Legal expense............................................. 7,766 1,068
Registration expense...................................... 10,070 1,079
Independent accountants................................... 6,734 534
Trustees' fees and expenses............................... 12,333 235
Reports to shareholders................................... 4,204 214
Other..................................................... 15,473 801
----------- -------
TOTAL EXPENSES.......................................... 450,826 14,597
Expenses waived and reimbursed (Note 3)................. -- (14,423)
----------- -------
NET EXPENSES............................................ 450,826 174
----------- -------
NET INVESTMENT GAIN (LOSS).............................. (317,887) 36
----------- -------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain/loss from security transactions......... 592,428 --
Net change in unrealized appreciation of investments...... 12,439,984 19,468
----------- -------
Net realized and unrealized gain on investments........... 13,032,412 19,468
----------- -------
Net increase in net assets resulting from operations...... $12,714,525 $19,504
=========== =======
</TABLE>
- ------------------------------------------
* Trainer Wortham Large-Cap Growth Fund commenced operations on December 8,
1999.
The notes to financial statements are an integral part of these statements.
<PAGE> 9
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIRST MUTUAL LARGE-CAP GROWTH
---------------------------- ----------------
SIX MONTHS PERIOD
ENDED YEAR ENDED
DECEMBER 31, ENDED DECEMBER 31,
1999 JUNE 30, 1999
(UNAUDITED) 1999 (UNAUDITED)*
------------ ------------- ----------------
<S> <C> <C> <C>
OPERATIONS
Net investment income (loss)............... $ (317,887) $ (448,570) $ 36
Net realized gain on investments........... 592,428 3,285,878 --
Net change in unrealized appreciation of
investments.............................. 12,439,984 13,467,038 19,468
----------- ----------- --------
Net increase in net assets resulting from
operations............................... 12,714,525 16,304,346 19,504
----------- ----------- --------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from realized gains on
investments.............................. (2,836,723) (3,441,613) --
----------- ----------- --------
Total distributions...................... (2,836,723) (3,441,613) --
----------- ----------- --------
CAPITAL SHARE TRANSACTIONS
Receipt from shares sold................... 7,050,927 3,537,403 252,016
Receipt from shares issued on reinvestment
of distributions......................... 2,711,218 3,274,771 --
Shares redeemed............................ (6,912,483) (4,116,984) (263)
----------- ----------- --------
Net increase in net assets resulting from
capital share transactions(a)............ 2,849,662 2,695,190 251,753
----------- ----------- --------
Total increase in net assets............. 12,727,464 15,557,923 271,257
NET ASSETS
Beginning of period........................ 54,768,521 39,210,598 --
----------- ----------- --------
End of period.............................. $67,495,985 $54,768,521 $271,257
=========== =========== ========
(a) Transactions in capital stock were:
Shares sold............................ 389,501 234,602 25,087
Shares issued on reinvestment of
distributions....................... 139,258 235,764 --
Shares redeemed........................ (381,192) (303,256) (25)
----------- ----------- --------
Net increase........................... 147,567 167,110 25,062
Beginning balance...................... 3,310,710 3,143,600 --
----------- ----------- --------
Ending balance......................... 3,458,277 3,310,710 25,062
=========== =========== ========
</TABLE>
- ------------------------------------------
* Trainer Wortham Large-Cap Growth Fund commenced operations December 8, 1999.
The notes to financial statements are an integral part of these statements.
<PAGE> 10
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
FIRST MUTUAL
--------------------------------------------------------------
SIX MONTHS
ENDED
DECEMBER 31, YEARS ENDED JUNE 30,
1999 -----------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................. $16.54 $12.47 $12.35 $13.81 $10.03 $8.21
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
- ----------------------------
OPERATIONS
- -------------
Net investment loss....... (0.09) (0.14) (0.07) (0.11) (0.09) (0.09)
Net gains on securities
(both realized and
unrealized)............. 3.92 5.35 2.72 0.95 4.79 2.10
------- ------- ------- ------- ------- -------
Total from investment
operations............ 3.83 5.21 2.65 0.84 4.70 2.01
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
--------------------
Dividends from net
investment income....... -- -- -- -- -- --
Distributions from capital
gains................... (0.85) (1.14) (2.53) (2.30) (0.92) (0.19)
------- ------- ------- ------- ------- -------
Total distributions..... (0.85) (1.14) (2.53) (2.30) (0.92) (0.19)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD.................... $19.52 $16.54 $12.47 $12.35 $13.81 $10.03
======= ======= ======= ======= ======= =======
TOTAL RETURN................ 23.16%+ 43.53% 25.40% 7.67% 49.12% 25.04%
RATIOS/SUPPLEMENTAL DATA
- ----------------------------
Net assets, end of period
(in 000's).............. $67,496 $54,769 $39,211 $33,649 $32,147 $20,281
Ratio of expenses to
average net assets...... 1.53%* 1.64% 1.66% 1.87% 1.74% 2.16%
Ratio of net investment
loss to average net
assets.................. (1.08%)* (1.02%) (0.56%) (0.96%) (0.82%) (0.77%)
Portfolio turnover rate... 4%+ 56% 81% 109% 107% 198%
</TABLE>
- ------------------------------------------
* Annualized.
+ Not annualized.
The notes to financial statements are an integral part of these financial
statements.
<PAGE> 11
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below set forth financial data for a share of capital stock
outstanding throughout the period presented.
<TABLE>
<CAPTION>
LARGE-CAP GROWTH(1)
-------------------
PERIOD
ENDED
DECEMBER 31,
1999
(UNAUDITED)
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $10.00
---------
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------------
Net investment income..................................... 0.00(a)
Net gains on securities (both realized and unrealized).... 0.82
---------
Total from investment operations........................ 0.82
---------
NET ASSET VALUE, END OF PERIOD.............................. $10.82
=========
TOTAL RETURN................................................ 8.20%+
RATIOS/SUPPLEMENTAL DATA
- ----------------------------
Net assets, end of period (in 000's)...................... $271
Ratio of expenses to average net assets
before reimbursement of expenses by Advisor............. 125.74%*
after reimbursement of expenses by Advisor.............. 1.50%*
Ratio of net investment income (loss) to average net
assets
before reimbursement of expenses by Advisor............. (123.93%)*
after reimbursement of expenses by Advisor.............. 0.31%*
Portfolio turnover rate................................... 0%
</TABLE>
- ------------------------------------------
(1) The Large-Cap Growth Fund commenced operations on December 8, 1999.
* Annualized.
+ Since inception, not annualized.
(a) Rounds to less than $0.01.
The notes to financial statements are an integral part of these financial
statements.
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Trainer Wortham Funds (the "Trust") is an open-end investment management company
which currently offers shares of four series: Trainer Wortham First Mutual Fund
("First Mutual Fund"); Trainer Wortham Large-Cap Growth Fund ("Large-Cap Growth
Fund"); Trainer Wortham Total Return Bond Fund ("Total Return Bond Fund"); and
Trainer Wortham California Intermediate Tax-Free Fund ("California Intermediate
Tax-Free Fund"). Each Fund has distinct investment objectives and policies. This
Semi-annual Report relates to the First Mutual Fund and the Large-Cap Growth
Fund. Information on the Total Return Bond Fund and the California Intermediate
Tax-Free Fund is provided in a separate report.
The First Mutual Fund seeks capital appreciation principally through investments
in common stock. The Fund 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.
The Large-Cap Growth Fund seeks capital appreciation. The Fund invests primarily
in equity securities of large capitalization companies that the Advisor believes
have above average growth rates.
Due to the inherent risk in any investment program, the Funds can not ensure
that their investment objectives will be realized. The following is a summary of
significant accounting policies consistently followed by the Funds in the
preparation of 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 amortized cost which approximates market value. All other securities are
valued at their fair value as determined in good faith by the Board of Trustees.
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. Discounts and premiums on
securities purchased are amortized over the life of the respective securities.
Distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. Those differences are
primarily due to different treatments for net operating losses and post-October
capital losses.
C. NET ASSET VALUE PER SHARE. Net asset value per share of the capital stock of
a Fund is determined daily as of the close of trading on the New York Stock
Exchange by dividing the value
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
of its net assets by the number of Fund 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 each Fund 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, for the
six-month period ended December 31, 1999 are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
---------- ----------
<S> <C> <C>
First Mutual Fund........................................... $5,615,381 $2,336,520
Large-Cap Growth Fund....................................... $ 249,762 --
</TABLE>
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 four separate investment advisory agreements (the
"Agreements"). Under the terms of each Agreement, the Advisor receives an annual
fee, accrued daily and paid monthly, of 0.75% of the average daily net assets of
the First Mutual Fund and the Large-Cap Growth Fund. During the six months ended
December 31, 1999, the Trust paid the Advisor $218,826 in Advisory fees on
behalf of First Mutual Fund and $87 on behalf of Large-Cap Growth Fund. For the
period December 8, 1999 (commencement of operations) through its current fiscal
year, June 30, 2000, the Advisor has voluntarily elected to waive advisory fees
and reimburse other operating expenses to the extent necessary to cause total
operating expenses not to exceed 1.50% for the Large-Cap Growth Fund. For the
period ended December 31, 1999, the Advisor waived and reimbursed expenses
amounting to $14,423 for the Large-Cap Growth Fund.
The Trust has adopted a Distribution Plan (the "Plan" or "Plans"), with respect
to First Mutual Fund and Large-Cap Growth Fund, pursuant to Rule 12b-1 under the
Investment Company Act of 1940, which permits the Fund to pay certain expenses
associated with the distribution of its shares. The Plan provides that the Trust
will reimburse Provident Distributors, Inc. (the "Distributor"), the Trust's
sole Underwriter and Distributor as of December 1, 1999, for actual distribution
and shareholder servicing expenses incurred by the Distributor not exceeding, on
an annual basis, 0.25% of the average daily net assets of First Mutual Fund and
Large-Cap Growth
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Fund. During the six months ended December 31, 1999, the Trust reimbursed the
Distributor $72,942 and $29 on behalf of First Mutual Fund and Large-Cap Growth
Fund, respectively, for distribution costs incurred. Distribution costs incurred
by First Mutual Fund and Large-Cap Growth Fund include $72,942 and $29,
respectively, retained by Provident Distributors, Inc. as compensation for their
distribution services.
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Certain officers and trustees of the Trust are affiliated persons of the
Advisor.
TRAINER WORTHAM FUNDS
845 THIRD AVENUE, 6TH FLOOR
NEW YORK, NY 10022
<TABLE>
<S> <C>
OFFICERS AUDITORS
David P. Como Briggs, Bunting & Dougherty, LLP
President Two Logan Square, Suite 2121
Philadelphia, PA 19103
John D. Knox
Vice President
CUSTODIAN
Robert Vile UMB Bank KC, NA
Vice President P.O. Box 412797
Kansas City, MO 64141
Brian J. O'Neill
Treasurer
FUND ADMINISTRATION
Kelly O'Neill PFPC Inc.
Secretary 3200 Horizon Drive
King of Prussia, PA 19406
INVESTMENT ADVISOR
Trainer Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
</TABLE>
Distributed by Provident Distributors, Inc., Four Falls Corporate Center, 6th
Floor, West Conshohocken, PA 19428 -- DFU 2/00
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> 16
TRUSTEES:
Robert H. Breslin, Jr.
David P. Como
Raymond Eisenberg
Todd L. Eisenberg
David Elias
Robert S. Lazar
Martin S. Levine
Timothy J. O'Hara
James F. Twaddell
OFFICERS:
David P. Como
President
John D. Knox
Vice President
Robert Vile
Vice President
Brian J. O'Neill
Treasurer
Kelly O'Neill
Secretary
For more complete information including
charges and expenses, you may request
a prospectus by calling:
888.257.4450
[TRAINER WORTHAM LOGO]
845 Third Avenue/6th Floor, New York, New York 10022
888.257.4450 - Fax: 415.288.1401 - www.trainerwortham.com
[TRAINER, WORTHAM FUNDS LOGO]
[SEMI ANNUAL REPORT]
DECEMBER 31, 1999
[FIRST MUTUAL FUND]
LARGE-CAP GROWTH FUND
888.257.4450
