A MESSAGE FROM THE VINTAGE FUNDS
Dear Shareholders,
Thank you for being part of our Vintage Funds family, as we continue our
dedication to your mutual fund investment needs and to assisting education,
charity and not-for-profit organizations through our V.O.I.C.E.sm (Vision for
Ongoing Investment in Charity and Education) sm Program.
Recent Market Behavior
The Federal Reserve continues to indicate by its actions and through its
publications that when the economy slows to around a 1% annual rate, the Fed
will initiate stimulative action, and when the economy nears a 4% annual rate,
the Fed will implement restraints. This "soft landing" engineered by the Fed is
maintaining the economy's gradual, non-inflationary growth with modest
productivity gains. Our long-term perspective anticipates that the economy will
continue to grow at a healthy, low-inflationary rate in a 1-4% band for several
years to come, provided that the existing Fed key personnel and its present
philosophy should remain. We believe this "steady-as-she-goes" policy should
continue to provide support for this market in the very near term and provide an
excellent foundation for a long-term bull market.
The current economic expansion is now over 6 1/2 years old. We expect continued
growth, punctuated by volatile, temporary corrections and no acceleration in
inflation as the economy moves into the fourth quarter and first quarter of
1998. We believe the Fed will continue to be cautious in raising rates. While
this approach is likely to please the markets, it will eventually put the Fed
behind in its fight against higher prices.
Summary
Our dollar is strong; corporate earnings are strong; and the economy continues
to grow at a controlled rate for what is proving to be an historically extensive
period. Despite these factors, many financial experts are concerned that the
market is overpriced and that corporate earnings could decline because companies
are unable to continue to reduce costs. Although this is a possibility in
certain sectors of the economy, we do not believe this to be a widespread
phenomenon over the long term. To the contrary, all evidence suggests
corporations will continue to embrace technology and form strategic alliances to
improve operating efficiency as well as to develop revolutionary ways to market,
sell, distribute and service their customers.
Last year we cautioned; "While a recession is more probable than rapid growth in
our opinion, what we think has the highest probability of occurring, however, is
slow, sustainable real GNP growth in the 2-3% range or the so called "soft
landing" scenario. In that scenario, inflation should remain relatively low,
causing capital spending to continue to expand". We believe this still to be a
conservative scenario and our funds remain well positioned to respond to this
type of market environment. We do, however, hold a somewhat guarded posture
regarding world financial markets, as we monitor certain foreign economies and
markets from the "sidelines".
We cautioned last year that the financial markets are not a one-way street and
that investors should prepare for the occasional rough patch by maintaining a
balanced portfolio of stock funds, bond funds, and money market funds. We
believe that our cautionary advice remains valid today.
In summary, we believe the economy appears to be in a multi-year expansion that
could continue for several more years. We think this period will be punctuated
by reactions, consolidations and fluctuations that, while sometimes dramatic,
will be a part of a long running growth trend in the major market indexes.
The Vintage Taxable Money Market Funds
We continue to anticipate, unless unexpected changes occur in the very near
term, that inflation will remain subdued. This, in turn, should cause interest
rates to remain relatively low for the next few years, especially if the Federal
Reserve in cooperation with the central banks of seven major industrial nations,
can continue to be successful in maintaining slow, non-inflationary growth in
their respective economies
<PAGE>
In light of the investment opportunities that exist in these exciting and oft
turbulent market conditions, our portfolio manager has continued to take steps
to assure a high-grade, low-risk portfolio for The Vintage Taxable Money Market
Fund. Our priorities are safety first, along with liquidity, and then yield
second. Our money market fund remains committed to professional responsiveness
to the changing financial markets, ensuring that the portfolio continues to seek
the highest possible safety and returns consistent with the fundamental
objectives and investment policies of the fund. In the meantime, as we
anticipate and monitor the economy, your Vintage Taxable Money Market Fund
continues to provide high quality, conservative, investment returns with
excellent service.
The Vintage Equity and Balanced Funds
We are very pleased with the performance of our Starwood Strategic Fund, which
opened to the public April 4, 1996. The Starwood Strategic Fund, a traditional
mutual fund, primarily invests in strong, financially seasoned U.S. growth
stocks. We are enthusiastic about the manner in which The Starwood Fund's
portfolio manager, Andrew Beer, has navigated the past year's turbulent markets.
With over thirty years of investment management experience, Andrew not only
brings a stellar performance history to The Vintage Funds, he possesses an
awareness of market conditions spanning numerous political administrations,
economies and business cycles. We anticipate his considerable expertise will
result in prudent investment decisions based on his thirty years of practical
risk assessment that should yield positive returns for our shareholders.
On December 20, 1996, The Fiduciary Value Fund acquired the assets of The
Laidlaw Covenant Fund and changed its name to The Laidlaw Fund. Jack Orben,
Chairman of Fiduciary Counsel, is the Fund's portfolio manager. Mr. Orben has
nearly 26 years of investment experience, and also serves as portfolio manger
for The Vintage Taxable Money Market Fund. The portfolio manger intends to
follow a socially responsible investment policy, and has retained, at no expense
to the Fund, Laidlaw Holdings Asset Management, Inc. to maintain a list of
qualifying companies. These companies are selected from the 1000 largest
corporations and based upon socially conscious corporate behavior.
On February 1, 1997, the Municipal Fixed Income Fund changed its name to The
First Lexington Balanced Fund. The fund seeks long term growth of capital and
current income. The new sub-adviser for the fund is Health Financial, Inc. Dr.
Gregory Kasten, president of Health Financial, is the portfolio manager. Dr.
Kasten utilizes an "active asset allocation" strategy, diversifying the fund's
assets by investing in other no-load mutual funds that invest in one of the
following six asset classes: (1) S&P 500 common stocks, (2) small-cap stocks,
(3) international stocks, (4) real estate investment trusts, (5) cash
equivalents, and (6) long-term investment rated corporate and government bonds.
Dr. Kasten has been utilizing this strategy since 1985 with great success. We
look forward to his valuable contribution to The Vintage Funds.
Our V.O.I.C.E.sm Program
The Vintage Funds are proud of our innovative program, V.O.I.C.E.sm (Vision for
-
Ongoing Investment in Charity and Education) sm by which individual and
- - - - -
institutional customers of The Vintage Funds can cause contributions to be made
to educational, charitable, religious and other philanthropic not-for-profit
organizations at no cost to the shareholder or the Funds.
One of the primary focuses of the V.O.I.C.E.sm program is to support and
supplement education in America by funding those not-for-profit organizations
which assist our universities and colleges, especially endowments, foundations
and general scholarship funds. At a time when educational budgets are
consistently being reduced, it is our sincerest hope that V.O.I.C.E. sm will be
just one of many ways that we can all give "a little bit of ourselves" back to
our communities, Their schools, colleges, universities, churches and other
not-for-profit organizations. This unique fundraising program was designed and
invented by Vintage Advisers, Inc. to assist not-for-profit organizations in
their funding efforts. We hope that you will participate in the Program and
direct us to contribute on your behalf to the not-for-profit of your choosing.
Thanks to your support of V.O.I.C.E.sm, numerous university and college
endowments, foundations and general scholarship funds are benefiting from the
Program.
In closing, we want to thank you for the opportunity to serve your investment
and philanthropic interests. Your business and personal relationship is
sincerely appreciated here, and we look forward to providing the highest quality
of service to you for many years to come.
Respectfully Submitted,
Timothy L. Ashburn
President
<PAGE>
THE STARWOOD STRATEGIC FUND
- ---------------------------
Managed By: Andrew E. Beer
Performance and Investment Summary
Total Returns show how the value of the Fund's shares changed over a set period
- --- in this case, since the inception of the Fund on April 4, 1996---and assume
that you held the shares through the entire period and reinvested all
distributions into the Fund. These Total Return figures are compared to the
benchmark performance of the S&P 500---a widely recognized, unmanaged index of
common stocks. Please note that indices do not take into account fees and
expenses of investing in the individual securities that they track, and that
individuals cannot invest directly in any index.
Performance*
Average Annual Total Starwood
Return for the Period Strategic S&P
Ended September 30, 1997 Fund Index
- ------------------------ ---- -----
Since Inception (4/4/96) 12.47% 27.98%
10/1/96-9/30/97 20.94% 37.82%
*Past performance is not predictive of future performance.
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the growth
of a hypothetical $10,000 investment. A fund's Total Return includes changes in
share price, plus reinvestment of any dividends (income) and capital gains (the
profits the fund earns when it sells securities that have grown in value).
- --------------------------------------------------------------------------------
(A line Graph comparing the Growth of $10,000 investment from April 1996 to
September 30, 1997 according to the SSF and the S&P 500)
- --------------------------------------------------------------------------------
Investment Summary
Top Ten Holdings as of September 30, 1997
Percent of Fund's Total Investments
Frontier Insurance Group 4.1%
Schlumberger Ltd 4.0%
Arrow Electronics 3.6%
Ament Inc. 3.5%
Travelers Group Inc. 3.4%
Tribune Company 3.4%
Gateway 2000 3.3%
McKesson Corp. 3.3%
Royal Dutch Pete NY Registry 3.3%
Exxon Corp. 3.2%
<PAGE>
Investment Review
Q: Who should consider the Starwood Strategic Fund?
A: The Starwood Strategic Fund invests principally in a diversified portfolio of
equity securities of seasoned, financially strong growth companies. Current
income is an incidental consideration and many of the Fund's investments should
provide regular dividends which may grow over time. Accordingly, the Fund is
suitable for investors who seek primarily appreciation over the long term.
Q: What are your views on the economic factors that have affected the market
during the past six months?
A: We believe a long term, post cold war, bull market remains intact and is
likely to continue for many months and even years to come. Fears expressed
earlier this year that the economy was growing too fast caused a steep reaction
mid-year in the technology sector as well as other somewhat cyclical businesses.
However, when it became evident that wage and price inflation was muted, and
when the markets were assuaged by comments from Mr. Greenspan, head of the
Federal Reserve, that existing measurements of inflation probably overstated
actual inflationary rates, the market responded favorably and stocks of strong
consistent growth companies rebounded.
Q: How did the Fund perform?
A: The Fund began to invest to meet its objectives on April 4, 1996. The Fund's
performance for this period ended September 30, 1997 was +20.34% For the same
period, the Standard and Poor's 500 Index returned +44.43%.
Q: What factors contributed to the Fund's below-market performance?
A: The primary factors were the market's mid-year correction, which momentarily
impacted many growth companies and technology sector companies in the Fund's
portfolio. In addition to the market corrections, the Fund, in its initial
months, incurred certain extraordinary expenses that are associated with the
Fund's startup. These two simultaneous extraordinary events contributed to the
less than favorable comparison with the S&P 500.
Q: How have you positioned the Fund's portfolio to improve performance?
A: The Starwood portfolio consists mostly of stocks of non-cyclical companies
evidencing consistent, strong growth which may appreciate to multiple earnings,
and some stocks of companies that, in addition to strong growth, may spurt ahead
due to unusual circumstances or opportunities. The portfolio is well balanced
between high capitalization stocks such as Merck, Proctor & Gamble and United
Technologies, and some lesser known stocks that are growing faster but somewhat
more erratically such as Cisco Systems, Inc.. We believe this balanced and
prudent time-tested approach will yield favorable results over the long-term.
Q: Based on the market's current environment, what is Starwood's investment
strategy for the months ahead?
A: In the current environment of low inflation, post cold war, reconstruction of
industry, and in the light of the high probability that we will continue the
next three years with a Democratic President and a Republican Congress, we
believe a favorable economic atmosphere exists for the market to continue to
undulate upward. Our expectations are that we will not see any devastating or
sweeping changes that have adverse consequences for the market coming from
Washington D.C.. We believe the political administration will keep the economy
reasonably balanced and that it will remain on an even, moderate growth keel. We
believe there will be periods of temporary uncertainty and short-term market
fluctuation. When these instances occur, we will prune and upgrade the portfolio
as necessary. However, we believe the market will continue to grow at a moderate
rate for the foreseeable future. Accordingly, we will continue to select and
hold the most attractively valued and growth oriented investment opportunities,
based on our investment selection criteria, that in our opinion will produce
favorable returns.
The views expressed in this report are those of the Adviser through the end of
the period stated on the cover. The Adviser's views and opinions are based on
economic data, market conditions and other information and are subject to change
at any time.
<PAGE>
THE LAIDLAW FUND
- ----------------
Managed By: Jack R. Orben
Performance and Investment Summary
Total Returns show how the value of the Fund's shares changed over a set
period---in this case, since the inception of the Fund on March 3, 1992---and
assume that you held the shares through the entire period and reinvested all
distributions into the Fund. These Total Return figures are compared to the
benchmark performance of the S&P 500---a widely recognized, unmanaged index of
common stocks. Please note that indices do not take into account fees and
expenses of investing in the individual securities that they track, and that
individuals cannot invest directly in any index.
Performance
Average Annual Total
Return for the Period Laidlaw S&P 500
Ended September 30, 1997 Fund Index
- ------------------------ ---- -----
Since Inception (3/3/92) 15.63% 18.07%
10/01/96-09/30/97 40.40% 37.82%
10/01/92-09/30/97 16.56% 17.78%
*Past performance is not predictive of future performance.
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the growth
of a hypothetical $10,000 investment. A fund's Total Return includes changes in
share price, plus reinvestment of any dividends (income) and capital gains (the
profits the fund earns when it sells securities that have grown in value).
- --------------------------------------------------------------------------------
(A line graph comparing the Growth of $10,000 investments from March, 1992 to
September 30, 1997 according to Laidlaw and S&P 500)
- -------------------------------------------------------------------------------
Investment Summary
Top Ten Holdings as of September 30, 1997
Percent of Fund's Total Investments
Amoco Corp. 6.5%
Bank of New York 6.5%
Air Products & Chemicals Inc. 6.3%
Federal Express 5.4%
Banc One Corp 5.1%
Clorox Company 5.0%
Herman Miller Inc. 4.5%
Cigna Corp. 3.7%
Allstate Corp. 3.7%
Merck & Company 3.7%
<PAGE>
Investment Review
- -----------------
Q: Who should consider The Laidlaw Fund?
A: The Laidlaw Fund is suitable for investors with long-term investment goals
and who seek growth of capital, current income and growth of income. The Fund
invests principally in a diversified portfolio of common stocks, preferred
stocks and securities convertible into common stock of socially conscious
companies that offer the prospect for growth of earnings while paying current
dividends.
Q: What are your views on the economic factors that have affected the market
during the past six months?
A: We believe a long term, bull market remains intact. A continuation of
favorable corporate earnings, level to declining interest rates and moderately
low inflation has contributed to the stock market's growth trend. Fears
expressed throughout the period by many financial experts that the economy was
growing too fast have contributed to occasional market choppiness and increased
volatility. However, these factors, on balance, have been offset by an
accelerating rate of consolidations occurring in many industries, particularly
the financial and technology sectors; stronger cash flows; a broadening of
interest in smaller company stocks and the expectation that the Fed will not
raise interest rates in the near future.
Q: How did the Fund perform?
A: Since the Laidlaw Fund began to invest to meet its objectives on March 3,
1992, its cumulative total return for the period ended September 30, 1997 was
125.76%. For the same period, the Standard and Poor's 500 Index returned
134.66%. The Fund's performance for the period beginning January 1, 1997 and
ending September 30, 1997 was +33.48%. For the same period, the Standard and
Poor's 500 Index was 29.63%, and the Dow Jones Industrial Average was 24.88%
Q: What factors have contributed to the Fund's performance this year?
A: The primary factors were volatility and the market's 3rd quarter, which was
the Dow Jones Industrial Average's third worst performance since 1994. The
market's nervousness earlier in the year regarding interest rates and corporate
earnings, combined with the Dow's temporary, lackluster 3rd quarter performance
impacted companies in many sectors as well as the Fund's portfolio.
Q: How have you positioned the Fund's portfolio to improve performance?
A: The Laidlaw portfolio is well balanced between quality growth and income
producing securities. The Fund's portfolio contains selected securities from the
1,000 largest corporations, based on socially conscious corporate behavior, and
the portfolio manager's experienced determinations and expectations that the
securities will perform well in the anticipated market environment. We believe
this balanced growth, income and socially conscious bias is prudent, and that it
should yield favorable results over the long-term.
Q: Based on the market's current environment, what is Laidlaw's investment
strategy for the months ahead?
A: As many financial analysts anticipated, the Federal Reserve left short term
interest rates unchanged at their September 30th meeting. This seems to signal
the Fed's momentary satisfaction with the general state of the economy. We
expect the central bank will continue to view economic conditions with publicly
expressed concern, which should continue to cause the financial markets to trend
upward cautiously, but upward nonetheless. We are of the opinion that as
concerns over third quarter earnings and the market's poor performance fade, it
is quite feasible the Dow Jones Industrial Average's record high closing, set in
August, of 8259.31 could be tested. In the current environment of low inflation,
we anticipate 4th quarter corporate earnings will probably match expectations,
However any signs of strong growth and/or favorable earnings may have a quick,
positive and dramatic effect on the market. We believe there will be periods of
temporary uncertainty and short-term market fluctuation. When these instances
occur, we will adjust the portfolio as necessary. Over the longer term, we
expect the market should continue to trend upward at a moderate rate.
Accordingly, we will continue to select the best investment opportunities, based
on our selection criteria, that in our opinion will produce favorable returns.
The views expressed in this report are those of the Adviser through the end of
the period stated on the cover. The Adviser's views and opinions are based on
economic data, market conditions and other information and are subject to change
at any time.
<PAGE>
THE FIRST LEXINGTON BALANCED FUND
- ---------------------------------
Managed By: Dr. Gregory W. Kasten
Performance and Investment Summary
Total Returns show how the value of the Fund's shares changed over a set
period--in this case, since the inception of the Fund on March 13, 1997--- and
assume that you held the shared through the entire period and reinvested all
distribution into the Fund. These Total Return figures are compared to the
benchmark performance of the S&P 500---a widely recognized, unmanaged index of
common stocks. Please note that indices do not take into account fees and
expenses of investing in the individual securities that they track, and that
individuals cannot invest directly in any index.
Performance*
Average Annual Total First Lexington
Return for the Period Balanced S & P 500
Ended September 30, 1997 Fund Index
- ------------------------ ---- -----
Since Inception (3/13/97) 18.54% 39.20%
*Past performance is not predictive of future performance.
*Commencement of operations according to investments objectives
There are several ways to evaluate a fund's historical performance: total
percentage change in value, the average annual percentage change, or the growth
of a hypothetical $10,000 investment. A fund's Total Return includes changes in
share price, plus reinvestment of any dividends (income) and capital gains (the
profits the fund earns when it sells securities that have grown in value).
- --------------------------------------------------------------------------------
(A line graph comparing the Growth of $10,000 investments from March 13 to
September 30 according to FLB and S&P 500)
- --------------------------------------------------------------------------------
Investment Summary
Holdings as of September 30, 1997
Percent of Fund's Total Investments
Vanguard Total Bond Market Index 20.8%
Vanguard GNMA Portfolio 20.7%
Vanguard Extended Market Index 15.6%
Vanguard Specialized Real Estate Index Fund 14.4%
Vanguard International Growth 13.0%
Vanguard Index Trust 500 Portfolio 5.0%
<PAGE>
Investment Review
- -----------------
Q: Who should consider The First Lexington Balanced Fund?
A: The First Lexington Balanced Fund is suitable for investors seeking long
growth of capital and current income. The Fund invests primarily in a
diversified portfolio of other no-load mutual funds that invest in one of the
following six financial asset classes: (1) S&P 500 common stocks, (2) small-cap
stocks, (3) international stocks, (4) real estate investment trusts, (5) cash
equivalents, and (6) long-term investment rated corporate and government bonds.
The portfolio manager believes this method of diversification reduces risk,
which may further appeal to investors desiring such risk management discipline.
Q: What are your views on the economic factors that affected the market during
the past six months?
A: We believe a long running bull market remains intact and is likely to
continue for many months and even years to come. However, during this period,
the portfolio manager's proprietary market indicators began signaling the market
was due for a correction in the near term. We believe the market has been, and
continues to be, fundamentally wary of current stock prices. We are of the
opinion that the possibility of an overvalued market, Which has been expressed
by various financial analysts through out the year, has contributed to the
market's volatility. We expect the primary reasons why the market should have
corrected have been offset by continued corporate earnings reports in expected
ranges, and the Fed's policy makers leaving short-term interest rates unchanged.
As a result, the market has continued its upward march with numerous tremors and
adjustments along the way.
Q: How did the Fund Perform?
A: The Fund began to invest to meet its objectives on March 13, 1997. The Fund's
performance for this period ended September 30, 1997 was +10.63%. For the same
period, the Standard and Poor's 500 Index returned +19.98% and The Dow Jones
Industrial Average returned +15.50%.
Q: What factors contributed to the Fund's performance?
A: The primary factors were certain extraordinary expenses associated with the
Fund's startup, and adjustments to the portfolio initiated by the portfolio
manager based upon the manager's proprietary market indicators signaling a
correction of potentially significant magnitude in the near term. Accordingly,
the manager adjusted the portfolio's asset allocation percentage more heavily
into interest rate securities. This strategy somewhat reduced the equity
position of the portfolio in anticipation of a selloff in the equities markets.
These two simultaneous events contributed to the less than favorable comparison
with S&P 500 and the Dow Jones Industrial Average during the period ending
September 30, 1997.
Q: How have you positioned the Fund's portfolio to improve performance?
A: In view of the portfolio manager's expectations of a market correction of
material magnitude in the near term, the Fund's portfolio asset allocation
percentages have been temporarily repositioned more heavily into interest rate
securities. The stategy is intended to preserve the Fund's assets during, what
the manager believes to be, a period of high risk for equities, and position
the Fund's assets to take advantage of a possible equity market selloff. The
strategy is further intended to reduce risk during this period of uncertainty
and potentially extreme volatility. The portfolio manager's modern portfolio
theory-based, asset allocation strategy, recognizes the theoretical probability
that there is only 6% chance that four asset classes will give a negative return
in the same year. For this and numerous other fundamental and technical reasons,
we believe this prudent balance of asset classes should yield favorable results
over the long-term.
Q: Based on the market's current environment, what is The First Lexington
Balanced Fund's investment strategy for the months ahead?
A: Our current environment of low to modest inflation, favorable signals from
the Fed, good corporate earnings and expectations of the positive effects of
corporate consolidations and evolving technology on industry, have created what
we believe is a favorable economic atmosphere which supports the market's
continued upward trend. We do believe however, this is a period of increased
risk and volatility. Our investment strategy for the months ahead will be to
monitor and adjust our asset allocation percentages to correspond to anticipated
market conditions, with an above normal bias towards risk management. We expect
this approach to produce favorable returns.
<PAGE>
THE TAXABLE MONEY MARKET FUND
- -----------------------------
Performance and Investment Summary
Investment Review
- -----------------
Q: Why should investors consider investing in The Vintage Taxable Money Market
Fund? Given the performance of the stock market over the past twelve months, do
money market funds make sense?
A: Yes. A prudent wealth-building strategy includes placing the "cash" portion
of an investor's portfolio into liquid and very conservative investments. Money
market funds are an excellent and suitable investment option for money which is
awaiting near term utilization into more aggressive, higher yielding
investments, or, that you wish to keep readily available to meet emergencies
and/or unanticipated events.
Q: For the previous six-month period, how would you describe the economic
climate that affected the types of instruments in which money market mutual
funds invest?
A: Inflation remained subdued and, therefore, interest rates remained relatively
low for the period which provided a slow, non-inflationary growth for our
economy. We expect this trend to continue. In the near term, we believe that the
greatest influence on interest rates will continue to be the rate of inflation.
The Federal Reserve continues to indicate by its actions and through its
publications that when the economy slows to around a 1% annual rate, the Fed
will initiate stimulative action, and when the economy nears a 4% annual rate,
the Fed will implement restraints. This "soft landing" engineered by the Fed is
maintaining the economy's gradual, non-inflationary growth with modest
productivity gains. The long-term perspective anticipates that the economy will
continue to grow at a healthy, low-inflationary rate in a 1-4% band for several
years to come, provided that the existing Fed key personnel and its present
philosophy should continue. The "steady as she goes" policy at the Fed has
provided, and we believe will continue to provide support for this market in the
very near term, and will be an excellent foundation and fertile soil for
long-term investments in equity markets.
Q: How have you responded to these changing conditions?
A: First and foremost, we believe our investors place a high premium on safety
when selecting a money market fund. They want "peace of mind" while riding out
choppy markets. Given the oscillating economic factors that have and will
continue to affect the short-term interest rate environment, we have diligently
worked to select high quality, short-term investments that meet our most
conservative average maturity targets. This investment approach will not produce
the highest possible yields, but in this type of market we prefer to favor the
side of conservatism and safety in our ever changing assessment of the
short-term interest rate environment.
Q: How did the Fund perform during this period?
A: The Fund's seven day yield on September 30, 1997 was 4.47%. The Fund's thirty
day yield on September 30, 1997 was 4.29%.
Q: How have you positioned the Fund for the future?
A: For some time now we have been taking steps to assure a high-grade, low-risk
portfolio for the Vintage Taxable Money Market Fund. Our priorities are safety
first, along with liquidity, and yield second. Our money market fund portfolio
manager remains committed to professional responsiveness to the changing
financial markets, ensuring that the Vintage portfolio continues to seek the
highest possible safety and returns consistent with the fundamental objectives
and investment policies of the portfolio. In the meantime, as we anticipate and
monitor the economy, your fund continues to provide high quality, conservative
investments with excellent service.
<PAGE>
Performance
To measure a money market fund's performance, you can look at either total
return or yield. Total return reflects both the change in a fund's share price
over a given period, and reinvestment of its dividends (or income). Yield
measures the income paid by a fund. Since a money market fund tries to maintain
a $1 share price, yield is an important measure of performance.
Yield
-----
Average Annual Total
Returnfor the Period
ended September 30, 1997
- ------------------------
Since Inception(6/5/97) 3.73%
10/1/96-9/30/97 4.38%
* Annualized performance for periods greater than one year.
* Past performance is not predictive of future performance.
<PAGE>
INVESTMENTS-STARWOOD STRATEGIC FUND
- -----------------------------------
Statement of Net Assets September 30, 1997
<TABLE>
<S> <C> <C>
Number Market
of Shares Value
--------- -----
Common Stocks - 89.86%
- ----------------------
Aerospace/Defense - 4.42%
Allied Signal Inc. 800 $ 34,000
United Technologies 200 16,200
Airlines - 0.74%
Southwest Airlines Company 264 8,432
Conglomerates - 2.17%
Tyco International LTD 300 24,619
Components - 2.52%
Intel Corporation 310 28,617
Computer System - 8.35%
Cisco Systems, Inc. * 375 27,398
Electronic Data System 1,000 35,500
Hewlett-Packard Company 460 31,999
Consumer/Specialty Retail - 17.02%
CVS Corp. Com 640 36,400
G & K Services, Inc. CL A 600 20,850
Gateway 2000 * 1,200 37,725
Procter & Gamble Company 500 34,531
Sealed Air Corp. * 595 32,688
Sears Roebuck & Company 550 31,316
Data Telecommunication - 0.99%
Raytheon Company 190 11,234
Drugs & Health Care - 8.25
Johnson & Johnson 172 9,911
McKesson Corp. New 370 37,717
Merck & Company, Inc. 129 12,892
Electronics - 9.67%
Arrow Electronics * 690 40,020
Avnet, Inc. 615 39,091
Kent Electronics * 780 30,810
Walgreen Company 1,300 33,312
*Non-income producing.
<PAGE>
Number Market
of Shares Value
--------- ---------
Entertainment - 2.59%
Walt Disney Company 365 $29,428
Financial Services - 6.26%
American International Group 235 24,249
Wells Fargo & Company 32 8,800
Travelers Group, Inc. 560 38,220
Food & Beverage - 2.62%
McDonald's Corp. 625 29,766
Insurance - 7.24%
American Annuity Group 1,675 36,012
Frontier Insurance Group 1,220 46,360
Media - 3.42%
Tribune Company New 730 38,918
Oil & Natural Gas - 13.60%
Chevron Corp. 420 34,939
Exxon Corp. 570 36,516
Royal Dutch Pete NY Registry 680 37,740
Schlumberger LTD Com 540 45,461
Total Common Stocks
(Cost $835,365) 1,021,671
---------
Repurchase Agreements - 8.62%
- -----------------------------
Star Bank ($100,000 GNMA II GTD 8375, 2/20/24)
Purchase date 9/30/97, Maturity Date 10/01/97,
Amount Payable at Maturity $98,015
Total Repurchase Agreements
(Cost $98,000) 98,000
------
Total Investments
(Identified cost $933,365) 1,119,671
Other Assets and Liabilities, Net - 1.52% 17,315
- ----------------------------------------- ------
Net Assets - 100% $1,136,986
==========
</TABLE>
<PAGE>
INVESTMENTS-LAIDLAW FUND
- ------------------------
Statement of Net Assets September 30, 1997
<TABLE>
<S> <C> <C>
Number Market
Common Stocks - 96.20% of Shares Value
- ---------------------- --------- -----
Banks - 11.83%
Banc One Corp. 2,750 $ 153,484
Bank of New York 4,000 192,000
Chemicals - 6.39%
Air Products & Chemicals Inc. 2,250 186,609
Computer Systems - 8.33%
Computer Sciences Corp. * 1,000 70,750
Hewlett-Packard Company 1,000 69,563
Sun Microsystems * 2,200 102,988
Data Telecommunication - 2.79%
Lucent Technology 1,000 81,375
Delivery Services - 5.48%
Federal Express * 2,000 160,000
Drugs & Health Care - 3.76%
Merck & Company, Inc. 1,100 109,931
Electronics - 3.66%
Hubbel Inc. "B" 2,310 106,838
Food & Beverage - 5.54%
CPC International 700 64,838
H. J. Heinz Company 2,100 96,994
Household Products - 5.08%
Clorox Company 2,000 148,250
Information Systems - 3.74%
Knight-Ridder 2,000 109,250
Insurance - 7.65%
Allstate Corp. 1,390 111,721
Cigna Corp. 600 111,750
* Non-income producing.
Number Market
of shares Value
---------- ----------
Investment Companies - 3.52%
A. G. Edwards Inc. 2,000 $102,750
Office Products - 6.88%
Bemis Company Inc. 1,500 67,125
Herman Miller Inc. 2,500 133,750
Oil & Natural Gas - 12.53%
Amoco Corp. 2,000 192,750
Apache Corp. 2,300 98,613
Pacific Enterprise 2,200 74,525
Pharmaceutical - 3.08%
Pharmacia & Upjohn Company 2,465 89,972
Retail - 2.92%
Sears Roebuck & Company 1,500 85,406
Steel - 3.02%
Timken Company 2,200 88,137
Total Common Stocks
(Cost $1,376,094) 2,809,369
---------
<PAGE>
Repurchase Agreements - 5.14%
- -----------------------------
Star Bank ($150,000 GNMA II GTD 8375, 2/20/24)
Purchase date 9/30/97, Maturity Date 10/01/97,
Amount Payable at Maturity $150,023
Total Repurchase Agreements
(Cost $150,000) 150,000
-------
Total Investments
(Identified cost $1,526,094) 2,959,369
Other Assets and Liabilities, Net - (1.34)% (39,027)
- -------------------------------------------- ----------
Net Assets - 100% $2,920,342
==========
</TABLE>
INVESTMENTS-THE FIRST LEXINGTON BALANCED FUND
- ---------------------------------------------
Statement of Net Assets September 30, 1997
<TABLE>
<S> <C> <C>
Number of Shares Market Value
---------------- ------------
Mutual Funds - 89.49%
- ---------------------
Vanguard Index Trust 500 Portfolio 1,733 $ 153,626
Vanguard Extended Market Portfolio 14,400 477,955
Vanguard GNMA Fund 61,183 634,464
Vanguard International Growth 20,995 397,223
Vanguard Specialized Real Estate Index Fund 30,809 440,568
Vanguard Total Bond Market Index 64,036 638,441
Total Mutual Funds
(Cost $2,598,733) 2,742,277
---------
Repurchase Agreements - 10.21%
- ------------------------------
Star Bank
($315,000 GNMA II GTD 8375, 2/20/24)
Purchase Date 9/30/97, Maturity Date 10/01/97,
Amount Payable at Maturity $313,047
Total Repurchase Agreements
(Cost $313,000) 313,000
-------
Total Investments
(Identified cost $2,911,733) 3,055,277
Other Assets and Liabilities, Net - 0.30% 9,234
- ----------------------------------------- -----
Net Assets - 100% $3,064,511
==========
<PAGE>
INVESTMENTS-THE TAXABLE MONEY MARKET FUND
- -----------------------------------------
Statement of Net Assets September 30,1997
Par Value Value (Note 2)
--------- --------------
Commercial Paper - 44.10%
- -------------------------
AT & T Corporation 5.45% 11/07/1997 $2,000,000 $1,988,797
Disney Walt Company 5.44% 01/07/1998 2,000,000 1,970,382
Ford Motor Credit Corporation 5.46% 10/16/1997 2,000,000 1,995,450
General Electric Capital Corporation 5.78% 12/05/1997 1,000,000 989,997
General Electric Capital Corporation 5.47% 01/14/1998 1,000,000 984,046
General Motors Credit Corporation 5.70% 12/05/1997 2,000,000 1,980,175
Hasbro Incorporation 5.71% 11/04/1997 2,000,000 1,989,554
IBM Credit Corporation 5.76% 10/23/1997 2,000,000 1,993,266
Lucent Technologies 5.47% 11/05/1997 2,500,000 2,486,705
Merrill Lynch 5.62% 11/12/1997 2,000,000 1,986,887
Sears Roebuck Corporation 5.45% 01/13/1998 2,000,000 1,968,511
United Parcel Service 5.53% 10/30/1997 2,000,000 1,991,187
Total Commercial Paper
(Cost $22,324,957) 22,324,957
----------
U.S. Government Securities - 44.03%
- -----------------------------------
Federal Home Loan Bank 5.59% 1/20/1998 2,500,000 2,458,606
Federal Home Loan Discount Note 5.52% 1/16/1998 2,000,000 1,966,649
Federal Home Loan Discount Note 5.53% 1/21/1998 2,000,000 1,968,138
Federal Home Loan Mortgage 5.42% 10/09/1997 2,000,000 1,997,627
Federal National Mortgage Association 5.53% 12/15/1997 2,500,000 2,471,553
Federal National Mortgage Association 5.45% 10/24/1997 2,500,000 2,471,927
Federal National Mortgage Association 5.48% 12/10/1997 2,000,000 1,979,194
Federal National Mortgage Association 5.50% 10/28/1997 3,000,000 2,987,850
Federal National Mortgage Association 5.53% 12/16/1997 2,500,000 2,491,439
Federal National Mortgage Association 5.50% 10/20/1997 1,500,000 1,495,717
Total U.S. Government Securities
(Cost $22,288,700) 22,288,700
----------
Repurchase Agreements - 11.46%
- ------------------------------
Star Bank
($4,800,000 GNMA II GTD 8359 01/20/24)
($1,000,000 GNMA II GTD 8375 02/20/24)
Purchase Date 9/30/97, Maturity Date 10/01/97,
Amount payable at Maturity $5,800,878
Total Repurchase Agreements
(Cost $5,800,000) 5,800,000
---------
Total Investments
(Amortized cost $50,413,657) 50,413,657
Other Assets and Liabilities, Net - 0.41% 206,053
- ----------------------------------------- -------
Net Assets - 100% $50,619,710
===========
</TABLE>
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
- ------------------------------------
September 30, 1997
<TABLE>
<S> <C> <C> <C> <C>
First Taxable
Starwood Lexington Money
Strategic Laidlaw Balanced Market
Fund Fund Fund Fund
---- ---- ---- ----
ASSETS
Investments, at value (Note 2) ........ $ 1,119,671 $ 2,959,369 $ 3,055,277 $ 50,413,657
Cash ................................. 484 7,700 3,797 354,994
Dividend receivable ................... 1,068 5,426 -- --
Interest receivable ................ 15 23 47 878
Receivable from adviser (Note 3)....... 13,283 23,207 5,890 166,697
Receivable for shares sold............ -- -- -- 62,916
Deferred organization costs (Note 2) 2,266 2,266 2,266 2,273
Prepaid expenses....................... 2,670 3,019 1,774 11,192
----- ----- ----- ------
Total assets .......................... 1,139,457 3,001,010 3,069,051 51,012,607
LIABILITIES
Dividends payable ..................... --- 74,223 --- ---
Payable for shares redeemed .......... --- --- --- 320,963
Accrued expenses ...................... 2,471 6,445 4,540 71,934
----- ----- ----- ------
Total liabilities ..................... 2,471 80,668 4,450 392,897
----- ------ ----- -------
NET ASSETS ................................. $ 1,136,986 $ 2,920,342 $ 3,064,511 $ 50,619,710
=========== =========== =========== ============
Net assets consist of:
Paid-in capital ....................... 962,398 1,487,052 2,920,964 50,619,710
Undistributed net realized gain (loss)
on investments ........................ (11,718) 15 3 ---
Net unrealized appreciation in
value of investments ............ 186,306 1,433,275 143,544 ---
------- --------- ------- ----------
Net assets ................................. $ 1,136,986 $ 2,920,342 $ 3,064,511 $ 50,619,710
=========== =========== =========== ============
Shares of capital stock
outstanding (no par value,
unlimited shares authorized)........... 122,220 1,493,537 278,328 50,619,710
Net asset value per share, offering
and redemption price .................. $ 9.30 $ 1.96 $ 11.01 $ 1.00
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENTS OF OPERATIONS
- ------------------------
For the year ended September 30, 1997
First Taxable
Starwood Lexington Money
Strategic Laidlaw Balanced Market
Fund Fund Fund Fund
---- ---- ---- ----
INVESTMENT INCOME
Income:
Interest .............................. $ 2,550 $ 1,729 $ 4,392 $ 2,629,855
Dividends ............................. 7,374 44,854 24,638 ---
----- ------ ------ ---------
Total net income ................. 9,924 46,583 29,030 2,629,855
----- ------ ------ ---------
EXPENSES:
Investment adviser fees (Note 3) ...... 5,778 18,634 4,426 245,999
Transfer agent fees (Note 3) .......... 521 1,671 209 12,332
Fund accounting fees .................. 521 1,671 209 12,332
Printing. ............................ 559 2,294 701 40,513
Administrative service fees ........... 2,316 7,427 1,125 66,590
12B-1 fees (Note 3).................... 769 2,473 829 49,212
Auditing fees ......................... 670 5,158 1,603 21,221
Legal fees ............................ 1,181 15,842 4,957 49,250
Trustee's fees ........................ 1,120 2,306 1,120 39,200
Custodian fees......................... 508 2,003 6,221 27,788
Registration and filing fees .......... 11,511 9,273 321 25,279
Postage ............................... 291 1,216 856 852
Servicing.............................. 1,158 3,716 2,337 1,770
Amortization of organization expenses . 850 852 1,244 74,009
Insurance ............................. 2,908 2,519 11 20,289
Other expenses ........................ 2,277 2,386 266 28,649
----- ----- --- ------
Total net expenses .................. 32,938 79,441 26,435 715,285
------ ------ ------ -------
Less: Expense reimbursement
from adviser (Note 3) ................. 13,313 33,193 6,161 160,946
------ ------ ----- -------
NET INVESTMENT INCOME (LOSS) ............... (9,701) 335 8,756 2,075,516
------ --- ----- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) on investments 16,241 453,387 4,095 ---
Change in net unrealized
appreciation of investments ...... 166,805 1,433,275 143,544 ---
------- --------- -------
Net gain (loss) on investments ........ 183,046 1,886,662 147,639 ---
------- --------- ------- ---------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ............. $ 173,345 $ 1,886,997 $ 156,395 $ 2,075,516
=========== ============ ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<S> <C> <C> <C>
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------
Starwood Strategic Fund Laidlaw Fund
----------------------- ------------
Year Year Year Year
Ended Ended Ended Ended
Sept 30, Sept 30, Sept 30, Sept 30,
1997 1996 1997 1996
---- ---- ---- ----
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) .................. $ (9,701) $ (27,288) $ 335 $ 8206
Net realized gain on investments ............... 16,241 (11,719) 453,387 72,801
Change in net unrealized appreciation of investments 166,805 19,501 1,433,275 117631
------- ------ --------- --------
Increase/Decrease in net assets resulting from operations 173,345 (19,506) 1,886,997 198,638
Dividends and distributions to shareholders from:
Net realized gains ................................ (16,240) --- (453,372) (820)
Net investment Income ............................... --- --- (325) (152,138)
-------- ------- ---- --------
TOTAL INCREASE (DECREASE) 157,105 (19,506) 1,433,300 45,680
Capital share transactions:
Proceeds from shares sold ...................... 656,554 506,045 230,238 565,090
Value of shares issued to shareholders in
reinvestment of dividends and distributions 16,240 --- 379,474 130,753
------ ------- ------- ---------
672,794 506,045 609,712 741,523
Cost of shares redeemed .......................... (176,371) (5,786) (2,435,409) (1,926,239)
-------- ------ ---------- ---------
Net increase in net assets resulting from
capital share transactions ................ 496,423 500,259 (1,825,697) (1,230,396)
------- ------- --------- ----------
TOTAL INCREASE IN NET ASSETS 653,528 480,753 (392,397) (1,184,716)
NET ASSETS:
Beginning of period ............................ 483,458 2,705 3,312,739 4,497,455
------- ----- --------- ---------
End of period including undistributed
(investment income/net investment loss) ... $ 1,136,986 $ 483,458 $ 2,920,342 $3,312,739
=========== ========== =========== ==========
Shares of capital stock of the Fund sold and redeemed:
Shares sold .................................... 78,146 63,263 119,583 20,000
Shares issued to shareholders in reinvestment
dividends and distributions .................... 1,746 --- 194,104 27,000
----- ------- ------- ---------
79,892 63,263 313,687 47,000
Shares redeemed................................. (20,510) (696) (730,418) (126,000)
------- ---- -------- --------
NET INCREASE IN NUMBER OF
SHARES OUTSTANDING ............................. 59,382 62,567 (416,731) (79,000)
====== ====== ========= =======
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------
First Lexington Taxable Money
Balanced Fund Market Fund
------------- -----------
Year Year Year Year
Ended Ended Ended Ended
Sept 30, Sept 30, Sept 30, Sept 31,
1997 1996 1997 1996
---- ---- ---- ----
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) ...................$ 8,756 $ (26,650) $ 2,075,516 $ 1,626,449
Net realized gain on investments ............... 4,095 --- --- ---
Change in net unrealized appreciation of investment 143,544 --- --- ---
------- ------ --------- ---------
Increase in net assets resulting from operations 156,395 (26,650) 2,075,516 1,626,449
Dividends and distributions to shareholders from
Net realized gains.............................. (4,092) --- --- ---
Net investment income .......................... (7,412) --- (2,075,516) (1,626,449)
------ --------- ---------- ----------
TOTAL INCREASE(DECREASE)............................ 144,891 --- --- ---
Capital share transactions:
Proceeds from shares sold ...................... 3,006,501 82,312 146,134,876 159,908,254
Value of shares issued to shareholders in
reinvestment of dividends and distributions 11,504 --- 2,224,498 1,471,593
------ ------- --------- ---------
3,018,005 82,312 148,359,374 161,379,847
Cost of shares redeemed ............................ (107,373) (46,774) (148,284,175) (112,065,721)
-------- ------- ------------ ------------
Net increase in net assets resulting from
Net increase in net assets resulting from
capital share transactions ................ 2,910,632 35,538 75,199 49,314,126
--------- ------ ------ ----------
TOTAL INCREASE IN NET ASSETS ....................... 3,055,523 8,888 75,199 49,314,126
NET ASSETS:
Beginning of period ............................ 8,988 100 50,544,511 1,230,385
----- --- ---------- ---------
End of period (including undistributed net
investment income/net investment loss) ...$ 3,064,511 $ 8,988 $ 50,619,710 $ 50,544,511
=========== ========== ============== =============
Shares of capital stock of the Fund sold and redeemed:
Shares sold ................................... 301,698 13,427 146,134,876 159,908,254
Shares issued to shareholders in reinvestment
dividends and distributions ............... 1,045 --- 2,224,498 1,471,593
----- ------- --------- ---------
302,743 13,427 148,359,374 161,379,847
Shares redeemed ................................ (32,342) (5,510) (148,284,175) (112,065,721)
------- ------ ------------ ------------
NET INCREASE IN NUMBER OF
SHARES OUTSTANDING ............................. 270,401 7,917 75,199 49,314,126
======= ===== ====== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
The following table includes selected data for a share outstanding throughout
each fiscal year or period and other performance information derived from the
financial statements.
First Municipal Municipal
Starwood Starwood Starwood Lexington Fixed Fixed
Strategic Strategic Strategic Balanced Income Income
Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ----
1997(a) 1996(b) 1995(c) 1997(a)(i) 1996(b) 1995(c)
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning .... $ 7.69 $10.00 $10.00 $ 22.60(j) $200.00(j) $200.00(j)
Income from investment
Operations:
Net investment income .... (0.26) (3.23) 0.00 (12.54) (177.40) 0.00
Net realized and unrealized
gain (loss) on investments 2.00 0.92 0.00 .99 0.00 0.00
---- ---- ---- --- ---- ----
Total from investment income 1.74 (2.31) 0.00 11.05 (177.40) 0.00
Less distributions:
Dividends from realized gains (0.13) 0.00 0.00 (0.01) 0.00 0.00
Dividends from net
investment income ........ 0.00 0.00 0.00 (0.03) 0.00 0.00
----- ---- ---- ----- ---- ----
Total from distributions ...... (0.13) 0.00 0.00 (0.04) 0.00 0.00
----- ---- ---- ----- ---- ----
Net asset value at end of period $ 9.30 $ 7.69 $10.00 $11.01 $22.60 $200.00
===== ====== ====== ====== ====== =======
TOTAL ANNUALIZED
RETURN (%) (f)............ 20.94 (3.97)(e) (d) 18.54(g) (d) (d)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period 1,136,986 483,458 2,705 3,064,511 8,988 100
Ratio of expenses to
average net assets .. 4.26% 15.99% 0.00% 3.06% 181.72% 0.00%
Ratio of expenses (after
reimbursement) to
average net assets .. 2.54% 15.25% 0.00% 2.35% 181.01% 0.00%
Ratio of net investment
Income to average net
assets (2.97)% (14.42)% 0.00% 0.30% (181.58)% 0.00%
Ratio of net investment
income (after reimbursement)
to average net assets (1.25)% (13.68)% 0.00% 1.01% (180.86)% 0.00%
Portfolio turnover 76.09% 169.83% 0.00% 6.60% 0.00% 0.00%
Average commission rate paid $ 0.0603 $ 0.0600 $ 0.0000 $ 0.0000 $ 0.0000 $ ---
</TABLE>
<TABLE>
<S> <C>
<FN>
(a) For the Year-Ended September 30, 1997.
(b) For the Year-Ended September 30,1996.
(c) For the Period June 2, 1995 (commencement of operations) to September 30, 1995.
(d) Investment in accordance with objective had not commenced at this time.
(e) For the period April 4,1996(commencement of investment in accordance with objective) to September 30,1996.
(f) Total return would have been lower had certain expenses not been reduced during the periods shown
(see Note 3).
(g) For the period March 13, 1997 (commencement of investment in accordance with objective) to September 30, 1997.
(h) For the period February 1, 1997 to September 30, 1997; expense ratio was 1.00%.
(i) The name of the fund was changed during the period (see Note 1).
(j) Beginning balance adjusted for reverse stock split (see Note 1)
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
The following table includes selected data for a share outstanding throughout
each fiscal year or period and other performance information derived from the
financial statements.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Laidlaw Laidlaw Laidlaw Laidlaw Laidlaw
Laidlaw Covenant Covenant Covenant Covenant Covenant
Fund Fund Fund Fund Fund Fund
---- ---- ---- ---- ---- ----
1997(a)(b) 1996(c)(g) 1995(d)(g) 1994(d)(g) 1993(d)(g) 1992(e)(g)
PER SHARE OPERATING............
PERFORMANCE:
Net asset value, beginning .... $ 1.77 $1.78 $1.54 $1.54 $1.49 $1.42
Income from investment
Operations:
Net investment income .... 0.00 0.00 0.00 0.00 0.00 0.01
Net realized and unrealized
gain (loss) on investments 0.68 0.08 0.45 0.04 0.06 0.12
---- ---- ---- ---- ---- ----
Total from investment income . 0.68 0.08 0.45 0.04 0.06 0.13
Less distributions:
Dividends from net
investment income ... 0.00 0.00 0.00 0.00 0.00 (0.01)
Net realized gains........ (0.49) (0.09) (0.21) (0.04) (0.01) (0.05)
----- ----- ----- ----- ----- -----
Total from distributions ...... (0.49) (0.09) (0.21) (0.04) (0.01) (0.06)
----- ----- ----- ----- ----- -----
Net asset value at end of period $ 1.96 $ 1.77 $1.78 $1.54 $1.54 $1.49
====== ====== ===== ===== ===== =====
TOTAL ANNUALIZED
RETURN (%) (f)............ 16.80 6.19 29.59 2.86 4.06 11.20
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period 2,920,342 3,313,000 4,497,000 4,381,000 4,996,000 4,284,000
Ratio of expenses to
average net assets .. 3.25% 4.81% 4.57% 5.20% 5.80% 7.09%
Ratio of expenses (after
reimbursement) to
average net assets .. 1.89% 2.44% 2.50% 2.50% 2.50% 2.50%
Ratio of net investment
Income to average net assets(1.35)% (2.09)% (2.10)% (2.57)% (3.16)% (3.90)%
Ratio of net investment
income (after reimbursement)
to average net assets 0.01% (0.28)% 0.02% 0.11% 0.16% 0.69%
Portfolio turnover ....... 32.35% 5.92% 61.00% 73.00% 107.00% 128.00%
Average commission rate paid $ 0.0618 $ 0.0100 $ --- $ --- $ --- $ ---
<FN>
(a) For the Year-Ended September 30, 1997.
(b) The name of the fund was changed during the period (see Note 1).
(c) For the Nine Months Ended September 30, 1996.
(d) For the Year-Ended.
(e) For the Period March 3, 1992 (commencement of operations) to
December 31, 1992.
(f) Total return would have been lower had certain expenses not been reduced
during the periods shown (see Note 3).
(g) Per share data adjusted for share conversion 8.41 to 1.
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
The following table includes selected data for a share outstanding throughout
each fiscal year or period and other performance information derived from the
financial statements.
<TABLE>
<S> <C> <C> <C>
Taxable Taxable Taxable
Money Money Money
Market Market Market
Fund Fund Fund
---- ---- ----
1997(a) 1996(b) 1995(c)
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning .... $ 1.00 $ 1.00 $ 1.00
Income from investment
Operations:
Net investment income .... 0.03 0.04 0.002
Net realized and unrealized
gain (loss) on investments 0.00 0.00 0.000
---- ---- -----
Total from investment income . 0.03 0.04 0.002
Less Distribution :
Dividends from net
investment income ... (0.03) (0.04) (0.002)
----- ----- ------
Total from distributions ...... (0.03) (0.04) (0.002)
----- ----- ------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00
======= ======= =======
TOTAL ANNUALIZED
RETURN (%) (d)............ 4.38 4.13 0.20
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period 50,619,710 50,544,511 1,230,385
Ratio of expenses to
average net assets .. 1.44% 1.25% 12.82%
Ratio of expenses (after
reimbursement) to
average net assets .. 1.12% 1.16% 0.47%
Ratio of net investment
Income to average net assets 3.86% 4.12% (11.94%)
Ratio of net investment
income (after reimbursement)
to average net assets 4.19% 4.21% 0.65%
Portfolio turnover ....... 0.00% 0.00% 0.00%
Average commission rate paid $ ---- $ ---- $ ----
<FN>
(a) For the Year-Ended September 30, 1997.
(b) For the Year-Ended September 30,1996.
(c) For the Period June 2, 1995 (commencement of operations) to
September 30, 1995.
</FN>
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1 - General
The Vintage Funds (the "Trust") was organized as an Indiana business trust on
February 1, 1995 and became registered under the Investment Company Act of 1940,
as amended, as an open-end management investment company, effective June 2,
1995. The Trust is a series composed of four no-load funds (the "Funds")
including The Starwood Strategic Fund, The Laidlaw Fund, The First Lexington
Balanced Fund, and The Taxable Money Market Fund.
The Starwood Strategic Fund seeks growth of capital. The Fund pursues this
objective by investing principally in a diversified portfolio of equity
securities of seasoned, financially strong growth companies.
The Laidlaw Fund seeks growth of capital, current income and growth of income.
The Fund pursues this objective by investing principally in a diversified
portfolio of common stock, preferred stocks and securities convertible into
common stock of socially conscious companies that offer the prospect for growth
of earnings while paying current dividends.
The First Lexington Balanced Fund seeks long term growth of capital and current
income. The Fund pursues this objective by investing principally in a
diversified portfolio of other no-load mutual funds selected from six major
financial assets classes.
The Taxable Money Market Fund seeks high level of current income consistent with
the preservation of capital and maintenance of liquidity. The Fund pursues this
objective by investing principally in a diversified portfolio of short-term
money market instruments.
On December 20, 1996 the Fiduciary Value Fund changed its name to The Laidlaw
Fund and acquired the assets of The Laidlaw Covenant Fund. The acquisition
consisted of the transference of all the assets and liabilities of The Laidlaw
Covenant Fund in exchange for shares of the Fiduciary Value Fund and the
distribution of such shares to the shareholders of The Laidlaw Covenant Fund in
liquidation of The Laidlaw Covenant Fund.
On February 1, 1997 The Municipal Fixed Income Fund changed its name to The
First Lexington Balanced Fund. In addition to the name change, the Fund changed
its policy and subadviser. On March 6, 1997, The First Lexington Balanced Fund
exercised a 1 for 20 reverse stock split.
Note 2 - Significant Accounting Policies
The following is a summary of the significant accounting policies followed by
the Trust in the preparation of its financial statements.
A) Security Valuations
Investments in The Taxable Money Market Fund are stated at amortized cost, which
approximates market value. The Fund securities are valued using the current
market valuations: either the last reported sales price, or in the case of
securities for which there is no reported last sale, the mean of the closing bid
and asked prices. Bid price is used when no ask price is available. Discounts
and premiums on securities purchased are amortized over the life of the
respective securities.
<PAGE>
B) Securities Transactions
Securities transactions are recorded on a trade date-plus-one basis. Realized
gains and losses from securities transactions are recorded on the identified
cost basis. For federal income tax purposes, the cost of investments owned on
September 30,1997 were the same as identified cost. As of September 30, 1997 the
composition of unrealized appreciation (the excess of value over tax cost) and
depreciation (the excess of tax cost over value) was as follows:
<TABLE>
<S> <C> <C> <C>
Net
Appreciation
Fund Appreciation Depreciation (Depreciation)
---- ------------ ------------ --------------
Starwood Strategic $ 209,121 $ (22,815) $ 186,306
First Lexington Balanced 143,544 -- 143,544
Laidlaw Fund 1,438,263 (4,988) 1,433,275
</TABLE>
C) Dividends and Distributions to Shareholders
Dividends, if any, from net investment income for The Starwood Strategic Fund,
The Laidlaw Fund, and The First Lexington Balanced Fund are paid quarterly.
Dividends, if any, from net investment income for The Taxable Money Market Fund
are paid on a daily basis. Net realized long term capital gains if any, are paid
at least annually for each fund. However, to the extent that net realized gains
of any Fund could be reduced by any capital loss carry-overs from the Fund,such
gains will not be distributed. Dividend distributions are recorded on the
ex-dividend date.
D) Federal Income Taxes
It is the policy of each Fund to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income to its shareholders.
E) Expenses
Direct expenses of each Fund are charged to the applicable Fund.Indirect or
general expenses of the Fund are allocated to the Fund either on the basis of
their relative net assets, special needs of each Fund, or as is deemed
appropriate.
Organizational costs and initial registration fees represent costs incurred in
connection with the organization, registration and the initial public offering
of the shares of the Trust and its' Funds. Organizational costs and initial
registration fees are deferred and will be amortized on a straight-line basis
over five years. In the event that the original shareholders (or any subsequent
transferee) redeems any of its original capital (seed capital) prior to these
organizational costs and initial registration fees being fully amortized, the
redemption proceeds will be reduced by a pro-rata portion of any then
unamortized organizational costs and initial registration fees. Organizational
costs and initial registration fees incurred were allocated accordingly to each
of the four portfolios prior to the commencement of operations. At September 30,
1997, the unamortized balance in each portfolio was as follows:
<TABLE>
<S> <C> <C> <C>
Portfolio Unamortized Balance Fund Unamortized Balance
- --------- ------------------- --------- -------------------
Starwood Strategic $2,266.00 First Lexington Balanced 2,266.00
Taxable Money Market 2,273.00 Laidlaw Fund 2,266.00
</TABLE>
<PAGE>
F) Estimates
Preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
G) Repurchase Agreement
Under the terms of a typical repurchase agreement, a Fund writes a financial
contract with a counterparty and takes possession of a government debt
obligation as collateral. The Fund also agrees with the counterparty to allow
the counterparty to repurchase the financial contract at a specific date and
price, thereby determining the yield during the Fund's holding period. This
arrangement will result in a fixed-rate of return not subject to the market's
fluctuation during the holding period indicated in the contract. The value of
the collateral is at least equal to the total amount of the repurchase
obligation, including interest. In the event of default by the counterparty, a
Fund has the right to use the collateral to offset any losses incurred.
H) Investments
Interest income is recorded on the accrual basis and dividend income is recorded
on the ex-dividend date.
Note 3 - Agreements and Other Transactions with Affiliates
The Trust has entered into an Investment Advisory Agreement with Vintage
Advisers, Inc. (the "Adviser"). In turn, the Adviser has entered into an
Investment Sub-Advisory Agreement with Starwood Corporation, Fiduciary Counsel,
Inc., and Health Financial, Inc. The Trust has entered into an Administration
Agreement with Unified Advisers, Inc. ("Unified") and a Distribution Agreement
with Unified Management Corporation (the "Distributor").
As Investment Adviser, the Adviser supervises and assists in the management of
the Trust, pursuant to the terms of the Investment Advisory Agreement.
The Adviser provides investment advisory services for which each Fund pays
on a monthly basis, an annual fee as follows:
<TABLE>
<S> <C> <C> <C>
% of Average Net % of Average Net
Fund Assets of the Portfolio Fund Assets of the Fund
- --------- ----------------------- --------- -----------------------
Starwood Strategic .75% Laidlaw .75%
Taxable Money Market .50% First Lexington Balanced .50%
</TABLE>
The Adviser has engaged Starwood Corporation to serve as sub-adviser to The
Starwood Strategic Fund, Fiduciary Counsel, Inc. to serve as sub-adviser to The
Laidlaw Fund, The Taxable Money Market Fund, and Health Financial, Inc. to serve
as sub-adviser to The First Lexington Balanced Fund. Each sub-adviser receives
annual investment management fees, which are not paid directly by the
Funds.
Each of the Sub-Advisers, Starwood Corporation, Fiduciary Counsel, Inc., and
Health Financial, Inc. is entitled to an annual fee, paid by the Adviser, for
its management services. The fees are payable monthly, at the following rates
for each Funds respectively:
<TABLE>
<S> <C>
<PAGE>
Name of Fund Fee (Percentage of Assets of Fund)
- ------------ ---------------------------------------
The Starwood Strategic Fund 0.35% of net assets up to $250 million;
0.30% of next $250 million of net assets;
0.25% of net assets in excess of $500 million
The Laidlaw Fund 0.35% of net assets up to $250 million;
0.30% of next $250 million of net assets;
0.25% of net assets in excess of $500 million
The First Lexington Balanced Fund 0.40% of net assets up to $250 million;
0.35% of next $250 million of net assets;
0.30% of net assets in excess of $500 million
The Taxable Money Market Fund 0.07% of net assets up to $1 billion;
0.05% of net assets in excess of $1 billion
</TABLE>
Unified, as administrator, receives an annual fee, payable monthly by each Fund.
The fee is equal to 0.435% of the Fund's average net assets,for all Funds except
The First Lexington Balanced Fund and The Taxable Money Market Fund, for which
the fee is equal to 0.185% of the Fund's average net assets.
Under a Distribution Plan adopted with respect to each Fundo pursuant to Rule
12b-1 under the Investment Company Act of 1940, the Trust pays the Distributor
an annual fee, payable monthly, of up to 0.10 % of the respective Fund's average
daily net assets
The Trust has adopted a Shareholder Services Plan (with respect to each Fund) in
which financial institutions may enter into a shareholder services agreement
with the Trust to provide administrative support services to the Funds. In
return for these services, a financial institution may receive payments from
each Fund at a rate not exceeding 0.15% of the Funds average net assets owned
beneficially by the institution's clients.
The receivable from the Adviser is as follows:
Name of Fund Amount
- ------------ ------
The Starwood Strategic Fund $ 13,283
The Laidlaw Fund 23,207
First Lexington Balanced Fund 5,890
The Taxable Money Market Fund 166,697
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Acts of 1940.
Certain Trustees and officers of the Trust are "affiliated persons" (as defined
in the Act) of the Vintage Funds. Each "non-affiliated" Trustee is entitled to
receive a quarterly Board of Trustees meeting fee of $2,400 and $400 per
additional meeting attended, plus expenses for services relating to the Trust.
<PAGE>
Note 4- Securities Transactions
For the twelve months ending September 30, 1997, purchases and sales of
investment securities, excluding short-term investments were as follows:
<TABLE>
<S> <C> <C>
Purchases Sales
--------- -----
The Starwood Strategic Fund $ 946,783 $ 527,786
The Laidlaw Fund 2,313,563 937,469
The First Lexington Balanced Fund 2,632,037 45,906
</TABLE>
Note 5- Reclassification of Capital Accounts
The Funds have adopted Statement of position 93-2, Determination. Disclosure and
Financial Statement Presentation of Income, Capital Gain and Return of Capital
Distributions by Investment Companies. As a result of this statement, the Funds
changed the classification of distributions to shareholders to better disclose
the difference between financial statement amounts and distributions determined
in accordance with income tax regulations. Accordingly, undistributed net
investments loss and paid-in capital have been adjusted as of September 30, 1997
in the following amounts. These restatements did not affect net investment
income, net realized gain (loss) or net assets for the year ended September 30,
1997.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and Board of Trustees
The Vintage Funds
We have audited the statements of assets and liabilities, including the
portfolios of investments, of The Vintage Funds (comprising, respectively, of
the Starwood Strategic Fund, the Laidlaw Fund, the First Lexington Balanced Fund
and the Taxable Money Market Fund) as of September 30, 1997, and the related
statements of operations, the statements of changes in net assets, and the
financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits 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, 1997, 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 audits provide 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 each
of the respective portfolios constituting The Vintage Funds as of September 30,
1997, the results of their operations, the changes in their net assets, and the
financial highlights for the periods indicated in conformity with generally
accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
October 15, 1997
<PAGE>
SHAREHOLDER VOTES
- -----------------
A special meeting of the shareholders of The First Lexington Balanced Fund (the
"Fund") was held on may 29, 1997. 79,898.745 shares were entitled to vote. All
60,985.873 shares voting on the matter voted in favor of a new sub-advisory
agreement between Vintage Advisers, Inc, the Fund's adviser, and Health
Financial, Inc., the Fund's sub-adviser. 19,912.872 shares abstained. The new
Sub-advisory agreement took effect upon the consummation of a merger transaction
between Unified Holdings, Inc. and Health Financial, Inc.
