<PAGE> 1
LOGO
SEMI-ANNUAL
REPORT
--------------------------------------------
MARCH 31ST, 1996
<PAGE> 2
May 20th, 1996
Dear Fellow Shareholder,
Welcome to the first semi-annual report for the Seneca Funds. As you may be
aware, we formed the Trust on December 18th, 1995 and went effective with the
SEC on March 1st, 1996. Each day brings continued growth in both our assets and
customer base. This is the first of our regular updates on our fund family and
your investments herein. We thank you for your support and appreciate the trust
you've placed in GMG/Seneca Capital Management and the Seneca Family of Funds.
Stocks continued to surge in this year's first quarter, extending their
robust gains of 1995. Bonds, however, fared poorly, as interest rates rose
almost a full percentage point. As of this writing, the equity markets continue
to provide investors with positive results. Our portfolios are focused on
companies with sound, compelling earnings growth prospects.
Bonds remain on the defensive due to rising energy prices, and the
resulting fear of more widespread inflation. At current yields, bonds offer good
value. Our portfolios are locking in the current attractive yield levels,
particularly in the corporate bond market.
When the inflation threat resolves, the market will again focus on the
realities of stable economic growth in an extended business cycle and controlled
inflation, ideal conditions for a continued run in financial assets. Add to
these ingredients the unabated flow of funds into the markets driven by
demographic factors and by the paucity of good investment alternatives, and the
recipe for an ongoing bull market is complete. We remain confident in our
continuing quest to outperform the markets in each of our investment
disciplines.
On behalf of all of us here at GMG/Seneca Capital Management, I thank you,
the charter investors in the Seneca Funds. We will strive to continue delivering
the excellence in investment performance and client service which has been a
hallmark of the firm since our inception.
Best Regards,
Eric L. Munson
Managing Director
GMG/Seneca Capital Management
<PAGE> 3
SENECA FUNDS
SENECA GROWTH FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
- ---------------------------------------------------- ------ -------
<S> <C> <C> <C>
COMMON STOCKS -- 28.3%
BANKS -- (1.0%)
BankAmerica Corporation......................... 10 $ 775
------
BROADCASTING -- (1.2%)
Evergreen Media (1)............................. 25 900
------
BROKERAGE SERVICES -- (1.2%)
Charles Schwab Corporation...................... 37 957
------
BUSINESS SERVICES -- (2.1%)
Danka Business Systems ADR...................... 23 972
First Data Corporation.......................... 10 705
------
1,677
------
DRUG AND HEALTH CARE -- (4.7%)
Cardinal Health Incorporated.................... 15 964
Healthsouth Corporation......................... 25 850
Medpartners/Mullikin Incorporated (1)........... 32 912
Merck and Company Incorporated.................. 15 934
------
3,660
------
ELECTRICAL EQUIPMENT -- (1.0%)
General Electric Company........................ 10 779
------
ELECTRONICS -- (1.2%)
Checkpoint Systems Incorporated (1)............. 37 920
------
FINANCIAL SERVICES -- (1.0%)
Chase Manhattan Corporation New (2)............. 10 705
------
FOOD AND BEVERAGES -- (1.2%)
Pepsico Incorporated............................ 15 949
------
GAS AND PIPELINE UTILITIES -- (1.2%)
Columbia Gas Systems Incorporated............... 20 918
------
HOMEBUILDERS -- (1.2%)
Centex Corporation.............................. 30 930
------
</TABLE>
See notes to financial statements.
1
<PAGE> 4
SENECA FUNDS
SENECA GROWTH FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
(CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
- ---------------------------------------------------- ------ -------
<S> <C> <C> <C>
COMMON STOCKS (CONTINUED)
HOUSEHOLD PRODUCTS -- (2.2%)
Black and Decker Corporation.................... 25 $ 947
Colgate Palmolive............................... 10 779
------
1,726
------
INTERNATIONAL OIL -- (1.0%)
Exxon Corporation............................... 10 816
------
LEISURE TIME -- (1.2%)
Walt Disney Company............................. 15 958
------
PETROLEUM SERVICES -- (1.0%)
Schlumberger Limited............................ 10 791
------
RETAIL TRADE -- (2.3%)
Lowes Companies Incorporated.................... 25 894
Wal-Mart Stores Incorporated.................... 40 920
------
1,814
------
SOFTWARE -- (3.6%)
HBO and Company................................. 10 942
Oracle Systems Corporation (1).................. 20 942
Sterling Commerce Incorporated (1).............. 30 923
------
2,807
------
TOTAL INVESTMENTS -- (COST $22,132*)................ 28.3% 22,082
OTHER ASSETS LESS LIABILITIES....................... 71.7% 56,003
--- ------
NET ASSETS.......................................... 100.0% $78,085
---- ------
------
</TABLE>
- ---------------
(1) Non-income producing security.
(2) Name change from Chemical Banking Corporation
* At March 31, 1996, the aggregate cost of investment securities for income
tax purposes was $22,132. Net unrealized depreciation aggregated $50, of
which $198 related to depreciated investment securities and $148 related to
appreciated investment securities.
See notes to financial statements.
2
<PAGE> 5
SENECA FUNDS
SENECA MID-CAP "EDGE" FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
- ----------------------------------------------------- ------ --------
<S> <C> <C> <C>
COMMON STOCKS -- 44.8%
BUSINESS SERVICES -- (2.0%)
Danka Business Systems ADR....................... 67 $ 2,831
-------
BROADCASTING -- (2.0%)
Evergreen Media (1).............................. 80 2,880
-------
BROKERAGE SERVICES -- (2.1%)
Charles Schwab Corporation....................... 113 2,924
-------
COSMETICS & TOILETRIES -- (2.0%)
Revlon Class A (1)............................... 100 2,750
-------
DRUGS & HEALTHCARE -- (12.1%)
Amerisource Health Corporation Class A (1)....... 85 2,805
Medpartners/Mullikin Incorporated (1)............ 98 2,793
Meridian Diagnostics............................. 270 2,869
Phycor Incorporated (1).......................... 65 2,860
Physio Control International Corporation (1)..... 140 2,800
Watson Pharmaceuticals Incorporated (1).......... 70 2,800
-------
16,927
-------
ELECTRONICS -- (6.0%)
Altera Corporation (1)........................... 50 2,794
BMC Industries Incorporated Minn................. 130 2,795
Checkpoint Systems Incorporated (1).............. 113 2,811
-------
8,400
-------
GAS AND PIPELINE UTILITIES -- (2.0%)
Columbia Gas Systems Incorporated................ 60 2,753
-------
HOTELS & RESTAURANTS -- (2.1%)
HFS Incorporated (1)............................. 60 2,918
-------
RETAIL TRADE -- (4.1%)
Orchard Supply Hardware (1)...................... 125 2,953
Kenneth Cole Productions Incorporated Class A
(1)............................................ 160 2,860
-------
5,813
-------
</TABLE>
See notes to financial statements.
3
<PAGE> 6
SENECA FUNDS
SENECA MID-CAP "EDGE" FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
(CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
- ----------------------------------------------------- ------ --------
<S> <C> <C> <C>
COMMON STOCKS (CONTINUED)
SOFTWARE -- (8.0%)
Cadence Design Systems Incorporated (1).......... 65 $ 2,868
HBO and Company.................................. 30 2,827
Oracle Systems Corporation (1)................... 60 2,827
Sterling Commerce Incorporated (1)............... 90 2,767
-------
11,289
-------
TELEPHONE -- (2.4%)
Cincinnati Bell Incorporated..................... 65 3,380
-------
TOTAL INVESTMENTS -- (COST $61,856*)................. 44.8% 62,865
OTHER ASSETS LESS LIABILITIES........................ 55.2% 77,594
---- -------
NET ASSETS........................................... 100.0% $140,459
---- -------
---- -------
</TABLE>
- ---------------
(1) Non-income producing security.
* At March 31, 1996, the aggregate cost of investment securities for income
tax purposes was $61,856. Net unrealized appreciation aggregated $1,009, of
which $1,187 related to appreciated investment securities and $178 related
to depreciated investment securities.
See notes to financial statements.
4
<PAGE> 7
SENECA FUNDS
SENECA BOND FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
NAME OF ISSUER INTEREST MATURITY PRINCIPAL
AND TITLE OF ISSUE RATE DATE AMOUNT VALUE
- ------------------------------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS -- 11.7%
FINANCE AND BANKING -- (3.7%)
Property Trust America..... 6.875% 02/15/2008 $ 5,000 $ 4,853
--------
INDUSTRIAL -- (8.0%)
Corporate Express
Incorporated............. 9.125% 03/15/2004 5,000 5,150
Quorum Health
Corporation.............. 11.875% 12/15/2002 5,000 5,538
--------
10,688
--------
TOTAL CORPORATE BONDS -- (COST $15,502)............. 15,541
--------
U.S. GOVERNMENT AND AGENCY SECURITIES -- 18.4%
(Cost $24,698)
COLLATERALIZED MORTGAGE
OBLIGATION
Government National
Mortgage Association Pool
408215..................... 7.000% 02/15/2026 25,000 24,377
--------
SHORT TERM INVESTMENT -- 37.7% (Cost $49,928)
U.S. GOVERNMENT
U. S. Treasury Bill........ 5.2% 04/11/1996 50,000 49,928
--------
TOTAL INVESTMENTS -- (COST $90,128*)................ 67.8% 89,846
OTHER ASSETS LESS LIABILITIES....................... 32.2% 42,652
------- --------
NET ASSETS.......................................... 100.00% $132,498
======= ========
</TABLE>
- ---------------
* At March 31, 1996, the aggregate cost of investment securities for income tax
purposes was $90,128. Net unrealized depreciation aggregated $282, of which
$39 related to appreciated investment securities and $321 related to
depreciated investment securities.
See notes to financial statements.
5
<PAGE> 8
SENECA FUNDS
SENECA REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
- -------------------------------------------------- ------ -------
<S> <C> <C> <C>
COMMON STOCKS -- 29.3%
HOTELS AND RESTAURANTS -- (1.1%)
Felcor Suite Hotels Incorporated.............. 25 $ 775
------
REAL ESTATE INVESTMENT TRUST -- (28.2%)
Apartment Investment and Management Company
Class A..................................... 57 1,189
Associated Estates Realty Corporation......... 25 512
Avalon Properties Incorporated................ 33 710
Cali Realty Corporation....................... 44 985
CBL and Associates Properties................. 16 338
Chateau Properties............................ 33 751
Crescent Real Estate Equities................. 21 706
Crown American Realty Trust................... 76 580
Debartolo Realty Company...................... 57 855
Del Webb Corporation.......................... 33 606
Developers Diversified Realty................. 33 969
First Industrial Realty Trust Incorporated.... 33 755
Franchise Financial Corporation of America.... 25 500
Gables Residential Trust...................... 41 984
Highwoods Properties Incorporated............. 25 697
Irvine Apartment Communities Incorporated..... 46 880
Liberty Property Trust........................ 41 846
Merry Land and Investment Company............. 33 718
Pacific Gulf Properties Incorporated.......... 18 333
Patriot American Hospitality Incorporated..... 13 343
Post Properties Incorporated.................. 16 520
Prime Residential Incorporated................ 16 298
Security Capital Pacific Trust................ 33 726
Shurgard Storage Centers Incorporated Class
A........................................... 21 551
Speiker Properties Incorporated............... 25 634
Starwood Lodging Trust........................ 25 844
Storage Trust Realty.......................... 25 556
Summit Properties Incorporated................ 41 820
Trinet Corporate Realty....................... 25 719
</TABLE>
See notes to financial statements.
6
<PAGE> 9
SENECA FUNDS
SENECA REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1996
(CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NAME OF ISSUER
AND TITLE OF ISSUE SHARES VALUE
- -------------------------------------------------- ------ -------
<S> <C> <C> <C>
COMMON STOCKS (CONTINUED)
REAL ESTATE INVESTMENT TRUST (CONTINUED)
Weeks Corporation............................. 18 450
Wellsford Residential Properties.............. 37 809
------
21,184
------
TOTAL INVESTMENTS -- (Cost $22,289*).............. 29.3% 21,959
OTHER ASSETS LESS LIABILITIES..................... 70.7% 53,082
------ ------
NET ASSETS........................................ 100.0% $75,041
------ ------
------ ------
</TABLE>
- ---------------
* At March 31, 1996, the aggregate cost of investment securities for income tax
purposes was $22,289. Net unrealized depreciation aggregated $330, of which
$88 related to appreciated investment securities and $418 related to
depreciated investment securities.
See notes to financial statements.
7
<PAGE> 10
SENECA FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MID-CAP REAL ESTATE
GROWTH "EDGE" BOND SECURITIES
FUND
-------- -------- -------- -----------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at
value -- (Note 2)................. $ 22,082 $ 62,865 $ 89,846 $ 21,959
Cash................................ 28,154 89,498 8,016 25,241
Dividend and interest receivable.... 0 0 390 148
Receivable for securities sold...... 0 0 5,140 0
Receivable for fund shares sold..... 50,000 50,000 50,000 50,000
Deferred organizational costs
(Note 5)......................... 53,166 53,166 52,986 53,347
Due from Seneca Management (Note 3)... 8,095 8,066 9,238 6,937
-------- -------- -------- --------
TOTAL ASSETS...................... 161,497 263,595 215,616 157,632
LIABILITIES
Payable for securities purchased.... 22,132 61,856 20,858 22,289
Organizational costs payable to
Seneca Management (Note 5)........ 54,428 54,428 54,428 54,428
Trustee fees payable................ 574 574 656 492
Accounts payable and accrued
expenses.......................... 6,278 6,278 7,176 5,382
-------- -------- -------- --------
TOTAL LIABILITIES................. 83,412 123,136 83,118 82,591
-------- -------- -------- --------
NET ASSETS........................ $ 8,085 $140,459 $132,498 $ 75,041
======== ======== ======== ========
NET ASSETS
Capital paid-in..................... $ 75,200 $134,200 $132,700 $ 75,200
Undistributed net investment
income (loss)..................... (19) (49) 55 177
Accumulated net realized gain (loss)
on investments.................... 2,954 5,299 25 (6)
Net unrealized appreciation
(depreciation) of investments..... (50) 1,009 (282) (330)
-------- -------- -------- --------
NET ASSETS........................ $ 78,085 $140,459 $132,498 $ 75,041
======= ======== ======== ========
INSTITUTIONAL CLASS:
Net Assets........................ $ 64,045 $126,523 $120,030 $ 62,523
Total shares outstanding.......... 5,739 11,429 12,121 6,290
NET ASSET VALUE, offering and
redemption price per Institutional
Class share....................... $ 11.16 $ 11.07 $ 9.90 $ 9.94
======== ======== ======== ========
ADMINISTRATIVE CLASS:
Net Assets........................ 14,040 $ 13,936 $ 12,468 $ 12,518
Total shares outstanding.......... 1,259 1,259 1,260 1,260
NET ASSET VALUE, offering and
redemption price per
Administrative Class share........ $ 11.15 $ 11.07 $ 9.89 $ 9.94
======== ======== ======== ========
COST OF SECURITIES.................. $ 22,132 $ 61,856 $ 90,128 $ 22,289
</TABLE>
See notes to financial statements.
8
<PAGE> 11
SENECA FUNDS
STATEMENTS OF OPERATIONS
FOR THE PERIOD* ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MID-CAP REAL ESTATE
GROWTH "EDGE" BOND SECURITIES
FUND FUND FUND FUND
------- ------- ------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income..................... $ 0 $ 0 $ 0 $ 195
Interest income..................... 0 0 91 0
------- ------- ------- -------
TOTAL INCOME...................... 0 0 91 195
======= ======= ======= =======
EXPENSES
Management fee -- Note 3............ 11 37 23 11
Administrative fee -- Note 3........ 5,000 5,000 5,000 5,000
Distribution fees --
Administrative Shares -- Note 3..... 2 2 2 2
Custodian fees...................... 3,752 3,752 4,289 3,216
Audit fees.......................... 143 143 164 126
Legal fees.......................... 430 430 492 369
Trustees fees....................... 574 574 656 492
Transfer agent fees................. 1,865 1,865 2,131 1,598
Organizational expenses............. 1,262 1,262 1,442 1,081
Other............................... 86 86 98 71
------- ------- ------- -------
Expenses before waivers and
reimbursements.................... 13,125 13,151 14,297 11,966
Fees waived by Advisor.............. (5,011) (5,037 ) (5,023) (5,011)
Expenses reimbursed by Advisor
(Note 3).......................... (8,095) (8,065 ) (9,238) (6,937)
------- ------- ------- -------
TOTAL EXPENSES.................... 19 49 36 18
------- ------- ------- -------
NET INVESTMENT INCOME/(LOSS)...... (19) (49 ) 55 177
------- ------- ------- -------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on
investments....................... 2,954 5,299 25 (6)
Change in net unrealized
appreciation
of investments.................... (50) 1,009 (282) (330)
------- ------- ------- -------
NET GAIN (LOSS)................... 2,904 6,308 (257) (336)
------- ------- ------- -------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS..................... $ 2,885 $6,259 $ (202) $ (159)
======= ======= ======= =======
</TABLE>
- ---------------
* The Growth, Mid-Cap "EDGE", Bond and Real Estate Securities Funds commenced
investment operations on March 10, 1996, March 10, 1996, March 7, 1996, and
March 12, 1996 respectively.
See notes to financial statements.
9
<PAGE> 12
SENECA FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
GROWTH MID-CAP BOND REAL ESTATE
FUND "EDGE" FUND FUND SECURITIES FUND
PERIOD PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED
3/31/96(1) 3/31/96(1) 3/31/96(2) 3/31/96(3)
---------- ------------- ---------- ---------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS
From operations:
Net investment
income/(loss)...... $ (19) $ (49) $ 55 $ 177
Net realized gain
(loss) on
investments........ 2,954 5,299 25 (6)
Change in net
unrealized
appreciation
(depreciation) of
investments........ (50) 1,009 (282) (330)
------- -------- -------- -------
Net increase
(decrease) in net
assets resulting
from operations.... 2,885 6,259 (202) (159)
Net increase from trust
share transactions
(Note 6)............. 50,200 109,200 107,700 50,200
------- -------- -------- -------
TOTAL INCREASE..... 53,085 115,459 107,498 50,041
Net Assets
Beginning of
period............. 25,000 25,000 25,000 25,000
------- -------- -------- -------
End of period (a).... $ 78,085 $ 140,459 $132,498 $75,041
======= ======== ======== =======
(a) Including
undistributed net
investment income
(accumulated net
investment loss)... $ (19) $ (49) $ 55 $ 177
</TABLE>
- ---------------
(1) For the period March 10, 1996 (commencement of investment operations)
through March 31, 1996.
(2) For the period March 7, 1996 (commencement of investment operations) through
March 31, 1996.
(3) For the period March 12, 1996 (commencement of investment operations)
through March 31, 1996.
See notes to financial statements.
10
<PAGE> 13
SENECA FUNDS -- INSTITUTIONAL CLASS SHARES
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD*
(UNAUDITED)
<TABLE>
<CAPTION>
REAL
MID-CAP ESTATE
GROWTH "EDGE" BOND SECURITIES
FUND
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1996(1) 1996(1) 1996(2) 1996(3)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF
PERIOD................................ $ 10.00 $ 10.00 $ 10.00 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss) (4)...... (0.01) 0.00 0.01 0.04
Net Realized and Unrealized Gain
(Loss) on Investments............... 1.17 1.07 (0.11) (0.10)
------- -------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS...... 1.16 1.07 (0.10) (0.06)
------- -------- -------- -------
NET ASSET VALUE AT END OF PERIOD....... $ 11.16 $ 11.07 $ 9.90 $ 9.94
======= ======== ======== =======
TOTAL RETURN (5)....................... 11.60% 10.70% (1.0)% (0.60)%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period........... $64,045 $126,523 $120,030 $62,523
Ratio of Operating Expenses to Average
Net Assets (6)(7)................... 0.85% 0.95% 0.65% 1.05%
Ratio of Net Investment Income/(Loss)
to Average Net Assets (6)........... (0.85)% (0.95)% 1.35% 13.85%
Portfolio Turnover Rate............... 128% 79% 26% 0%
Average Commission Rate (8)........... $ 0.06 $ 0.06 N/A $ 0.06
</TABLE>
- ---------------
* Per share amounts have been calculated using the monthly average share
method, which more appropriately presents the results since commencement of
investment operations.
(1) For the period March 10, 1996 through March 31, 1996.
(2) For the period March 7, 1996 through March 31, 1996.
(3) For the period March 12, 1996 through March 31, 1996.
(4) Net investment income (loss) is after waiver of certain fees and
reimbursement of certain expenses by the Investment Advisor (see Note 3 to
the financial statements). If the Investment Advisor had not waived fees and
reimbursed expenses, net investment income (loss) per share would have been
$(3.36) for the Growth Fund; $(1.45) for Mid-Cap "EDGE"(SM) Fund; $(1.58)
for the Bond Fund; and $(2.79) for the Real Estate Securities Fund.
(5) Total return represents aggregate total return for the period indicated. The
total return would have been lower if certain fees and expenses had not been
waived or reimbursed by the advisor.
(6) Annualized.
(7) If the Investment Advisor had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 796% for
the Growth Fund; 265% for Mid-Cap "EDGE"(SM) Fund; 283% for the Bond Fund;
and 889% for the Real Estate Securities Fund.
(8) The average commission paid is applicable for the funds that invest greater
than 10% of average net assets in equity securities transactions on which
commissions are charged.
See notes to financial statements.
11
<PAGE> 14
SENECA FUNDS-ADMINISTRATIVE CLASS SHARES
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD*
(UNAUDITED)
<TABLE>
<CAPTION>
REAL
MID-CAP ESTATE
GROWTH "EDGE" BOND SECURITIES
FUND FUND FUND FUND
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1996 (1) 1996 (1) 1996 (2) 1996 (3)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF
PERIOD............................... $ 10.00 $ 10.00 $ 10.00 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income/(Loss) (4)...... (0.01) (0.01) 0.00 0.07
Net Realized and Unrealized Gain
(Loss) on Investments............... 1.16 1.08 (0.11) (0.13)
------- -------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS...... 1.15 1.07 (0.11) (0.06)
------- -------- -------- -------
NET ASSET VALUE AT END OF PERIOD....... $ 11.15 $ 11.07 $ 9.89 $ 9.94
======= ======== ======== =======
TOTAL RETURN (5)....................... 11.50% 10.70% (1.10)% (0.60)%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period........... $14,040 $13,936 $12,468 $12,518
Ratio of Operating Expenses to Average
Net Assets (6)(7)................... 1.50% 1.60% 1.30% 1.70%
Ratio of Net Investment Income/(Loss)
to Average Net Assets (6)........... (1.50)% (1.60)% 0.38% 13.19%
Portfolio Turnover Rate............... 128% 79% 26% 0%
Average Commission Rate (8)........... $ 0.06 $ 0.06 N/A $ 0.06
</TABLE>
- ---------------
* Per share amounts have been calculated using the monthly average share
method, which more appropriately presents the results since commencement of
investment operations.
(1) For the period March 10, 1996 through March 31, 1996.
(2) For the period March 7, 1996 through March 31, 1996.
(3) For the period March 12, 1996 through March 31, 1996.
(4) Net investment income (loss) is after waiver of certain fees and
reimbursement of certain expenses by the Investment Advisor (see Note 3 to
the financial statements). If the Investment Advisor had not waived fees and
reimbursed expenses, net investment income (loss) per share would have been
$(5.37) for the Growth Fund; $(2.42) for Mid-Cap "EDGE"(SM) Fund; $(2.70)
for the Bond Fund; and $(4.80) for the Real Estate Securities Fund.
(5) Total return represents aggregate total return for the period indicated. The
total return would have been lower if certain fees and expenses had not been
waived or reimbursed by the advisor.
(6) Annualized.
(7) If the Investment Advisor had not waived fees and reimbursed expenses, the
ratio of operating expenses to average net assets would have been 843% for
the Growth Fund; 388% for Mid-Cap "EDGE"(SM) Fund; 416% for the Bond Fund;
and 938% for the Real Estate Securities Fund.
(8) The average commission paid is applicable for the funds that invest greater
than 10% of average net assets in equity securities transactions on which
commissions are charged.
See notes to financial statements.
12
<PAGE> 15
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
NOTE 1 -- ORGANIZATION
Seneca Funds (the "Trust") is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company. The Trust was
organized as a Delaware business trust on December 18, 1995. The Trust consists
of four series: Seneca Growth Fund, Seneca Mid-Cap "EDGE"(SM) Fund, Seneca Bond
Fund and Seneca Real Estate Securities Fund (individually, the "Fund", and
collectively, the "Funds.") The Board of Trustees has authorized each Fund to
issue two classes of common shares: Administrative Shares and Institutional
Shares.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS: Equity securities traded on a national securities
exchange are valued at their last sales price; or if no sales are reported, at
the mean between the representative bid and asked quotations obtained from a
quotation reporting system or from an established market maker. Fixed income
securities, other than those having a maturity of 60 days or less, are valued on
the basis of quotes obtained from brokers or pricing services. Short-term
investments having a maturity of 60 days or less will be valued at amortized
cost, when the Trustees determine that amortized cost is fair market value.
Securities for which market quotations are not readily available will be valued
at fair value as determined in good faith by, or at the direction of, the
Trustees.
REPURCHASE AGREEMENTS: Each Fund may enter into repurchase agreements where
the Fund buys a security and the seller simultaneously agrees to repurchase the
security on a specified future date at an agreed-upon price. Because the
security constitutes collateral for the repurchase obligation, a repurchase
agreement can be considered a collateralized loan. The Fund's risk is the
ability of the seller to pay the agreed-upon price on delivery date. The
Trustees have established criteria to evaluate the creditworthiness of parties
with whom the Funds may enter into repurchase agreements. The Funds will limit
the repur-
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<PAGE> 16
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(CONTINUED)
(UNAUDITED)
chase agreements to securities issued by the United States Government, its
agencies, and its instrumentalities.
SECURITY TRANSACTIONS, INVESTMENT INCOME and EXPENSES: Investment security
transactions are recorded as of trade date. Realized gains and losses on
investment security sales are determined on the basis of identified cost.
Dividend income is recorded on the ex-dividend date. Interest income and
expenses are recorded daily on an accrual basis. Fund expenses not directly
attributable to a specific fund or class are allocated evenly or on the basis of
net assets to each Fund. Fund expenses that are not related to the distribution
of shares of a particular class or to services provided specifically to a
particular class are allocated between the classes on the basis of relative
average daily net assets of each class. Expenses that relate to the distribution
or services provided to a particular class are allocated to that class.
Investment income and realized and unrealized gains/losses are allocated between
the classes on the basis of net assets of each class.
DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income on shares
of the Seneca Bond Fund are determined at the class level and are declared and
paid monthly. Dividends from net investment income on shares of the Seneca Real
Estate Securities Fund are determined at the class level and are declared and
paid quarterly. Dividends from net investment income on shares of the Seneca
Growth Fund and Seneca Mid-Cap "EDGE"(SM) Fund are determined at the class level
and are declared and paid annually. Each Fund distributes net realized capital
gains, if any, at least annually.
FEDERAL INCOME TAXES: Each Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended, and by distributing to shareholders substantially all of its taxable
income. Therefore, no Federal income or excise tax provision is required. Income
and capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for market discount,
losses deferred due to wash sales and excise tax regulations.
14
<PAGE> 17
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(CONTINUED)
(UNAUDITED)
ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
income and expenses at the date of the financial statements. Actual results
could differ from these estimates.
NOTE 3 -- AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
The Trust has an Investment Management Agreement with GMG/Seneca Capital
Management L.P. ("Seneca Capital Management"), under which Seneca Capital
Management manages the investments of each Fund. For its services, Seneca
Capital Management receives a fee from each Fund at an annual percentage of the
average daily net assets of each Fund. Such investment management fees are
0.70%, 0.80%, 0.50%, and 0.85% for the Growth Fund, Mid-Cap "EDGE"(SM) Fund,
Bond Fund and Real Estate Securities Fund, respectively.
The Trust has a Distribution and Services Agreement (the "Agreement") with
Genesis Merchant Group Securities L.P. ("GMG Securities") an affiliate of Seneca
Capital Management, under which GMG Securities serves as the distributor and
principal underwriter of each Fund's shares. Pursuant to the Agreement, GMG
Securities receives a fee from each Fund at an annual rate of 0.25% of the
average daily net assets attributable to the Administrative Shares of each Fund.
The Trust has an Administrative Services Agreement with Seneca Capital
Management where Seneca Capital Management is responsible for the day-to-day
administrative functions of the Trust. Pursuant to the Agreement, Seneca Capital
Management receives a fee from each Fund at an annual rate of 0.08% of the first
$125 million, 0.06% of the next $125 million, and 0.04% thereafter, subject to
certain minimums which are waived for the first six months during which the
Trust is in operation. Seneca Capital Management has entered into an agreement
with State Street Bank & Trust Company ("State Street") to provide most of the
administrative functions for the Trust.
15
<PAGE> 18
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(CONTINUED)
(UNAUDITED)
Seneca Capital Management has agreed to voluntarily waive its fees and
reimburse other operating expenses of each Fund (other than certain
extraordinary or nonrecurring expenses) until the earlier of September 30, 1996
or such time as the Fund's assets exceed $50 million, to the extent necessary to
prevent the expenses for each Fund and class from exceeding the following
percentages of average daily net assets:
<TABLE>
<CAPTION>
FUND ADMINISTRATIVE CLASS INSTITUTIONAL CLASS
---------------------------- -------------------- -------------------
<S> <C> <C>
Seneca Growth............... 1.50% 0.85%
Seneca Mid-Cap Edge......... 1.60 0.95
Seneca Bond................. 1.30 0.65
Seneca Real Estate
Securities................ 1.70 1.05
</TABLE>
For the period ended March 31, 1996, Seneca Capital Management waived
$5,011, $5,037, $5,023, and $5,011 in fees for the Growth, Mid-Cap EDGE(SM) ,
Bond, and Real Estate Securities Funds, respectively. In addition, for the
period ended March 31, 1996, Seneca Capital Management reimbursed expenses of
$8,095, $8,066, $9,238, and $6,937 for the Growth, Mid-Cap EDGE(SM) , Bond and
Real Estate Securities Funds, respectively.
Trustees of the Trust who are not interested persons receive a fee of
$2,500 for each meeting attended and are reimbursed for expenses incurred in
connection with such attendance.
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<PAGE> 19
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(CONTINUED)
(UNAUDITED)
NOTE 4 -- INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investments, excluding
short term securities, for the Trust, for the period ended March 31, 1996 were
as follows:
<TABLE>
<CAPTION>
NON- NON-
GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT
PURCHASES PURCHASES SALES SALES
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Seneca Growth
Fund.............. $ 33,232 $ 0 $ 14,054 $0
Seneca Mid-Cap
"EDGE"(SM) Fund... 81,455 0 24,898 0
Seneca Bond Fund.... 15,502 24,698 0 0
Seneca Real Estate
Securities Fund... 22,289 0 0 0
</TABLE>
NOTE 5 -- ORGANIZATION COSTS
The Trust bears all costs in connection with its organization. The
organization costs will be amortized on a straight-line basis over a period of
sixty months from the commencement of investment operations. The costs
associated with state registration of shares will be amortized on a
straight-line basis over a period of twelve months. If any of the Initial Shares
are redeemed before the end of the amortization period, the proceeds of the
redemption will be reduced by the pro rata share of unamortized organization and
state registration costs.
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<PAGE> 20
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(CONTINUED)
(UNAUDITED)
NOTE 6 -- CAPITAL STOCK TRANSACTIONS
For the period from commencement of investment operations through March 31,
1996:
<TABLE>
<CAPTION>
INSTITUTIONAL
SHARES ADMINISTRATIVE SHARES
SHARES DOLLARS SHARES DOLLARS
------ -------- ------ --------
<S> <C> <C> <C> <C>
GROWTH FUND (1)
Shares sold............ 4,489 $ 50,100 9 $ 100
Shares issued to
shareholders in
reinvestment......... 0 0 0 0
Shares redeemed........ 0 0 0 0
------ -------- ------ --------
Net increase........... 4,489 $ 50,100 9 $ 100
====== ======== ====== ========
</TABLE>
<TABLE>
<CAPTION>
INSTITUTIONAL
SHARES ADMINISTRATIVE SHARES
SHARES DOLLARS SHARES DOLLARS
------ -------- ------ --------
<S> <C> <C> <C> <C>
MID-CAP "EDGE"(SM) FUND (1)
Shares sold............ 10,179 $109,100 9 $ 100
Shares issued to
shareholders in
reinvestment......... 0 0 0 0
Shares redeemed........ 0 0 0 0
------ -------- ------ --------
Net increase........... 10,179 $109,100 9 $ 100
====== ======== ====== ========
</TABLE>
<TABLE>
<CAPTION>
INSTITUTIONAL
SHARES ADMINISTRATIVE SHARES
SHARES DOLLARS SHARES DOLLARS
------ -------- ------ --------
<S> <C> <C> <C> <C>
BOND FUND (2)
Shares sold............ 10,871 $107,600 10 $ 100
Shares issued to
shareholders in
reinvestment......... 0 0 0 0
Shares redeemed........ 0 0 0 0
------ -------- ------ --------
Net increase........... 10,871 $107,600 10 $ 100
====== ======== ====== ========
</TABLE>
18
<PAGE> 21
SENECA FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(CONTINUED)
(UNAUDITED)
NOTE 6 -- CAPITAL STOCK TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES ADMINISTRATIVE SHARES
SHARES DOLLARS SHARES DOLLARS
------ -------- ------ --------
<S> <C> <C> <C> <C>
REAL ESTATE SECURITIES FUND (3)
Shares sold.......... 5,040 $ 50,100 10 $ 100
Shares issued to
shareholders in
reinvestment....... 0 0 0 0
Shares redeemed...... 0 0 0 0
------ -------- ------ --------
Net increase......... 6,280 $ 50,100 10 $ 100
====== ======== ====== ========
</TABLE>
- ---------------
(1) For the period March 10, 1996 (commencement of investment operations)
through March 31, 1996.
(2) For the period March 7, 1996 (commencement of investment operations) through
March 31, 1996.
(3) For the period March 12, 1996 (commencement of investment operations)
through March 31, 1996.
NOTE 7 -- SHARES OF BENEFICIAL INTEREST
At March 31, 1996, certain shareholders were record owners of more than 10%
of total outstanding shares of the following Portfolios:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
NAME OF PORTFOLIO SHAREHOLDERS SHARES OWNED
- ---------------------------------------- ------------ --------------
<S> <C> <C>
Growth Fund............................. 2 100%
Mid-Cap "EDGE"(SM) Fund................. 3 93%
Bond Fund............................... 3 94%
Real Estate Securities Fund............. 2 100%
</TABLE>
19
