STAAR Investment Trust
604 McKnight Park Dr.
Pittsburgh, PA 15237
Phone 412-367-9076
Fax 412-367-9141
Annual Report
January 1, 1998 to December 31, 1998
Investment Strategies You Can UnderstandSM
Letter to Shareholders
April 12, 1999
Dear Shareholder:
On April 4th the STAAR Investment Trust Funds celebrated their three-year
anniversary! I am so very thankful for the opportunity to serve our investors,
and I am enthusiastic about the future.
In 1996 I set out to create a family of funds which would provide an
understandable, simple and easy-to-use alternative to the confusion and
complexity of the investment world. I wanted to offer a secure and stable
place to weather the storms of volatile markets, a place where investors
could be comfortable.
My aim was to provide a personal, caring environment where investors could
be confident that their nest eggs were being cared for with integrity and
intelligence. My hope is that our shareholders will appreciate our common
sense approach and have a greater sense of confidence and peace of mind as
they pursue their financial goals.
Three years into our five-year plan, I am pleased to report that we have
achieved these objectives. We have provided a product offering wide investment
diversification in a simple, understandable and easy-to-use package. STAAR is
the simple solution to complex investment needs.
We have an excellent staff who care about the well being of our investors and
are ready to serve them with diligence and excellence. And the overall
performance of the Trust has been within our objectives.
You can count on the fact that we care as much about your investments as
we do our own. That's because my staff and I also have our own money invested
in the Trust.
As I look to the future, I anticipate a dynamic marketplace where both
opportunities and risks will abound. 1999 looks to be a year where both real
and perceived problems could help continue the volatility experienced in 1998.
There are still some aspects of last year's international turmoil that have not
had their full effect on our economy. The narrow focus of stock market gains
in a few stocks suggests some imbalances, which may need correction. Wars
and rumors of wars continue. And of course, there may be some conservative
and even eccentric behavior as a result of Y2K concerns that could affect
investments.
On the positive side, the overall environment for long-term investors is
encouraging. Inflation and interest rates remain in healthy ranges. Companies
are making money and growing. The technological revolution is in full swing,
offering the potential for an increase in the global standard of living
comparable to that of the industrial revolution. International economic ills
appear to be on the mend. It is not a time for fear and timidity. It is a
time of adventure and potential, a time for self-control and common sense, a
time for confidence and hope.
The detailed information in this report is provided to assist you in
understanding your investment. Please feel free to call me personally if you
have a question.
On behalf of the Trustees and people of STAAR Financial Advisors, Inc., I
want to thank you for your continued confidence in us. We remain deeply
grateful for you and committed to your well being.
Sincerely Yours,
J. Andre Weisbrod, Trustee
President, STAAR Financial Advisors, Inc., Advisor to the Trust
1998 Results and Observations:
4/12/99
1998 was a turbulent year for equity markets (stocks). International
crises and high domestic valuations set the stage for a nearly 20% correction
in the large company stock market between mid-July and the end of August.
Small Cap stocks and International Emerging Markets fared worse.
However, conditions stabilized, helped by Federal Reserve actions to lower
interest rates, and the markets recovered with remarkable alacrity. At the
beginning of 1999, the long-term bull market was intact.
If you made investments in stocks during the period from mid-February
through June, you probably did not gain much on those deposits. However, if
you made investments in stocks in September and October, that would have
helped your overall performance.
The broad Mid-Cap and Large Company stock markets ended the year with
mixed results. The Wilshire Midcap indexes actually lost money. The New York
Stock Exchange Composite gained 16.55%. The S&P 500 stocks were up much more,
but this index has ceased to reflect the overall markets. As the Wall Street
Journal pointed out in its January 18, 1999 issue, the average stock in the
index gained only 10.8%, yet the index itself was up 28.7% due to weighting
toward a few stocks which have been leaders the last couple years. Therefore, I
believe it may no longer be appropriate to use the S&P500 as a comparison tool
for long-term investing in stocks.
The bond market was much more stable than stocks in 1998. If you held
bonds for the whole year, they would likely have returned between 5% and 9% for
high quality government and corporate bonds, depending on maturity dates.
Lower-rated, high yield "junk" bonds did not do so well. And if you had kept
your money in a money market fund, the return would probably have been between
4.5% and 5%.
This was the first year since 1990 where large company stocks went down
more than 10% during the year. In fact, on August 31 most large company
indexes were down close to 20% from their mid-July highs. International
emerging markets and small company indexes fared even worse.
The recovery has been rapid and spectacular. From August 31 to December
31, large stocks gained 22%, small stocks 25% and international emerging
markets up over 21%! And the gains have continued into 1999.
But individual mutual funds were all over the place, even within
categories. Funds with similarly good performance over the previous five years
experienced radically different performances in 1998.
Consider Chart A. At the beginning of the year, how could anyone have
known that a venerable fund such as the Templeton Foreign Fund would lose 4.9%
while Europacific Growth would gain 15.5%? That's over a 20% difference! Both
funds had dependable long-term records and had made average returns of 13.9%
and 14.9% respectively over the five-year period from 1993 through 1997.
This is a great argument for diversification among managers. Good
managers can have bad years. But rarely will a diverse group of good managers
all falter in the same year. (
<TABLE>
Chart A -- Fund Performance Disparity
<CAPTION>
5 Yr* Avg Tot
Fund Objective Style Ret Thru 12/31/97 1998 Tot. Ret.
<S> <C> <C> <C> <C>
Large Company
Funds
Putnam Inv. A Growth Large Growth 20.7% 35.9%
Torray Growth Large Blend 23.7% 8.2%
Small Company
Funds
Ivy US Emerg Gr Small Co. Small Growth 16.1%* 18.0%
SSGA SmallCap* Small Co. Small Blend 22.3% -7.5%
International
Funds
Europacific Gr. Foreign Large Blend 14.9% 15.5%
Templeton For. Foreign Large Value 13.9% -4.9%
</TABLE>
*Ivy US Emerging Growth and SSGA SmallCap are 4 yr. average total returns.
How to Measure Your Own Investment Performance
It is important not to get hung up in comparisons against other
investments, especially over short time periods. In most years, and especially
1998, it will be easy to find someone who did much better than you did... or
much worse. You can drive yourself nuts reading too many magazines and rating
charts. If you actually followed many financial publications' recommendations,
you would probably be changing everything you own every couple months chasing
the Holy Grail of "best performance".
It is much saner and realistic to evaluate your holdings by asking
questions similar to the following:
1) Did your overall investment portfolio perform within your long-term
objectives and risk tolerance?
In other words, if you were a moderately aggressive or aggressive investor
who believes in international diversification, including developing markets,
you may not have done as well as you would have wished. However, that is
not a good reason to dump your international investments. History shows
that what goes down usually goes up and vice versa. Just look at what has
happened since August 31.
If you owned a mix of investments designed to give you an 8% to 10%
average return over 10 years, you should have been well aware that the
potential for significant losses over any given quarter or year were not only
possible, but probable. Such downturns should not surprise us. Nor should
they alter our original planning strategies much. History indicates that
patience and the courage to invest when markets are down usually pay off.
If your investments did not perform outside their volatility expectations
and your long-term performance is close to your objectives, there is probably
little need for significant changes in your investment strategy.
2) Have you considered the timing of your investment deposits?
Don't compare your investments to whole year returns if you were not in
the market the whole year. If you made deposits in the period from mid-
February to June, it is very possible to have lost some money. It is doubtful
that you made much, unless you bought bonds or held onto cash and made
additional purchases in September. And if you pulled out after the downturn,
you probably locked in losses.
But just because you were unlucky in timing doesn't mean you should lose sight
of your original plan. If you had invested in large company stocks at the peak
in 1987 and watched as your portfolio lost more than 1/3 of its value within
three months, you would have been tempted to get out of the market. Many poor
souls did. However, if you had just kept your stock investments and they made
only an average return, you still would have gained over 10% per year through
1998!
3) If you were investing for the first time today, would your overall
philosophy be radically different?
If you set aside the emotions of the market volatility experienced in
1998, chances are you would choose a similar investment approach today. A good
asset allocation plan will show best case, worst case, and reasonable
expectation projections. You need to choose a mix of investments with which
you are comfortable.
Remember that markets will go down. When they do, do not lose sight of your
original objectives and what you believed you were willing to risk to achieve
them.
However, if your life situation has changed, or you have changed your
objectives and philosophy, then you should make appropriate adjustments to your
portfolio.
Investments are like trees. Allowed to grow with patience, good soil and
deep roots, they can grow strong over time, weathering most storms.
Y2K Compliance:
As you are probably aware, January 1, 2000, is a critical date for anyone
and any business dependent on computers. The Securities and Exchange
Commission has required all mutual funds to file progress reports with them
and to provide ongoing reports to shareholders regarding compliance. These
reports are available upon request.
In brief, a third party has tested the internal hardware and software
systems critical to the management of the Trust and those tests indicated that
our critical systems were compliant. We are checking with third-party entities
regarding their status. While we can offer no guarantees, we are optimistic
that the systems involved in managing and administrating the Funds will be
functional.
Visit Our Web Site:
www.staarinvest.com
We should have transferred the contents of our site to this address by the end
of April 1999. You can also go to the old address, staarsystem.com, if there
are any problems accessing the new address. Check out performance, articles
and our "Funny File". E-mail your questions.
Perspective & Performance
Indexes used for comparisons are selected as being closest to each Fund's
objectives.
Intermediate Bond Fund (IBF)
The IBF is designed to produce average returns with below average risks.
The Fund's 1998 performance of 7.4% was just shy of the average of 7.7% for 435
intermediate high quality bond funds tracked by Morningstar. With weighting
toward U.S. government and government agency debt instruments and an average
maturity of 4.6 years, this Fund is positioned conservatively to meet its
objectives of providing current income with concern for the safety of princi-
pal. Investors should note that the Fund is designed to provide a "plain
vanilla" intermediate bond portfolio for investors to utilize within an asset
allocation plan. Aggressive techniques used by some other bond mutual funds,
such as leverage and derivatives, are not currently being employed, and any
future use of such techniques is anticipated to be of a limited nature as
described in the prospectus.
<TABLE>
For periods ending 12/31/98.
<CAPTION>
Description Last Quarter One Year Two Year Avg. Annual Return
Three Year Avg. Annual Return Since Public Inception
(5/28/97) Since Private Inception (4/4/96)
<S> <C> <C> <C>
<C> <C>
<C>
Intermediate Bond
Fund (IBF)
A staggered port
folio of US
Gov't, Gov't
Agency and Invest
ment Grade Corp
orate Bonds with
an average matur
ity usually
between 3 and 7
years. 0.17% 7.4% 7.2%
N/A 8.3%
5.7%
Lipper Intermed.
Inv. Grade Bond
Funds 0.12% 7.9% 8.4%
N/A 10.0%
8.1%
Lehman Bros. US
Treas. Intermed.
Index 0.22% 8.6% 8.2%
N/A 9.4%
7.7%
</TABLE>
Current Yield as of 12/31/98 ........................... 5.5% **
S.E.C. Yield as of 12/31/98 ............................ 5.36% ***
Average Maturity ....................................... 4.6 YearsPortfolio
Turnover ............................................... 22.5%
* Total returns include reinvested dividends and gains.
** Current Yield is calculated by dividing the projected annual income by the
current net assets (total portfolio value less accrued expenses)
*** S.E.C. Yield is calculated by taking actual net income received during the
past thirty days divided by the average shares for the last thirty days,
divided by the maximum offering price on the last day of the period and then
annualized.
Long Term Bond Fund (LTBF)
The LTBF has performed remarkably well since inception. Its 1998 total
return of 8.6% exceeded both the Lipper US Government and Corporate A Rated
bond fund indexes. The outlook for bonds in 1999 is somewhat uncertain. The
direction for interest rates will depend on which of two factors emerges
dominant as the year progresses. On one hand, factors such as increasing wages
and gasoline prices augur for higher inflation. This has caused rates to go up
in early 1999. On the other, lower earnings growth and the fear of recession
would tend to keep rates in their current range or slightly lower.
As described in the prospectus, the average maturity of bonds held by the
LTBF will be over ten years. Generally, bonds will have maturities of at least
ten years at the time of purchase. However, since it is anticipated that many
bonds will be held to their maturity dates, and others may have call
provisions, some of the portfolio may be of a more intermediate or even short-
term nature. The Fund may also hold cash and cash equivalents for risk
management and to provide liquidity.
<TABLE>
For periods ending 12/31/98.
<CAPTION>
Description Last Quarter One Year Two Year Avg. Annual Return
Three Year Avg. Annual Return Since Public Inception
(5/28/97) Since Private Inception (4/4/96)
<S> <C> <C> <C>
<C> <C>
<C>
Long Term Bond
Fund (LTBF)
A staggered port
folio of US
Gov't, Gov't
Agency and
Investment Grade
Corporate Bonds
with an average
maturity over
10 years. -0.04% 8.6% 9.9%
N/A 12.8%
8.9%
Lipper US Gov't
Funds Index -0.23% 7.8% 8.4%
N/A 10.3%
7.9%
Lipper Corporate
A-Rated Bond
Funds Index 0.11% 7.3% 8.2%
N/A 10.3%
8.1%
</TABLE>
Current Yield as of 12/31/98 ........................... 6.8% **
S.E.C. Yield as of 12/31/98 ............................ 5.7% ***
Average Maturity ....................................... 15.2 Years
Portfolio Turnover ..................................... 6.4%
*Total returns include reinvested dividends and gains.
** Current Yield is calculated by dividing the projected annual income by the
current net assets (total portfolio value less accrued expenses)
*** S.E.C. Yield is calculated by taking actual net income received during the
past thirty days divided by the average shares for the last thirty days,
divided by the maximum offering price on the last day of the period and then
annualized.
Larger Company Stock Fund (LCSF)
The LCSF finished the year stronger, and ended just below the Lipper
Growth & Income funds index (+13.6%). Some managers failed to perform as
expected during the correction, and while the LCSF's conservative approach paid
off in less volatility, it did not perform as well as expected. As a result,
four funds were sold and two were added starting in the Fall. There was
tremendous disparity of performance in 1998, and some traditional benchmarks
did not reflect the markets as consistently as in previous years. In
particular, the S&P500 index was anomalous. Because of the way this index is
formulated, it did not present an accurate picture of the broad market.
With high valuations, continued uncertainty overseas and concerns about Y2K,
more volatility is expected, but large stocks should continue to be a
profitable investment for long term investors.
<TABLE>
For periods ending 12/31/98.
<CAPTION>
Description Last Quarter One Year Two Year Avg. Annual Return
Three Year Avg. Annual Return Since Public Inception
(5/28/97) Since Private Inception (4/4/96)
<S> <C> <C> <C>
<C> <C>
<C>
Larger Co. Stock
Fund (LCSF)
A mix of large
company and some
mid-cap stock
funds (fund of
funds) with an
objective of
Growth with some
Income. Indi
vidual stocks
may be owned. 17.8% 12.9% 18.5%
N/A 16.7%
17.4%
Lipper Growth &
Income Funds
Index 16.3% 13.6% 20.0%
N/A 17.5%
19.4%
Dow Jones
Industrial
Average 17.6% 18.13% 19.3%*
N/A 14.7%*
19.1%*
Lipper Growth
Funds Index 22.7% 25.7% 26.9%
N/A 26.1%
23.7%
</TABLE>
Portfolio Turnover .................................. 2.78%%
* Without dividends.
**Total returns include reinvested dividends and gains.
Smaller Company Stock Fund (SCSF)
The SCSF has continued its above average performance in a difficult
smallcap market. In 1998 most small company funds lost money, as did the
Russell 2000 index. While the Trust's Funds were not yet included in
Morningstar's database at the end of 1998, the SCSF's total return of +2.7%
would have placed it in the top third of all funds tracked by Morningstar
having a Small Company Objective. After four years of trailing the Large Caps,
there is a strong argument for smaller companies to begin outperforming large
companies, possibly within the next 12 to 18 months.
<TABLE>
For periods ending 12/31/98.
<CAPTION>
Description Last Quarter One Year Two Year Avg. Annual Return
Three Year Avg. Annual Return Since Public Inception
(5/28/97) Since Private Inception (4/4/96)
<S> <C> <C> <C>
<C> <C>
<C>
Smaller Co.
Stock Fund (SCSF)
A mix of small
company and some
mid-cap, and
microcap stock
funds (fund of
funds). Indi
vidual stocks may
be owned. 19.1% 2.7% 8.3%
N/A 10.4%
9.0%
Lipper Small Cap
Funds Index 18.4% -0.9% 6.4%
N/A 8.5%
7.1%
Russell 2000
Index 16.3% -2.6% 7.9%*
N/A 7.4%*
8.8%
</TABLE>
Portfolio Turnover ........................................ 6.5%%
* Total returns include reinvested dividends and gains.
International Fund (INTF)
The INTF's broad diversification includes emerging markets, which hurt the
Fund's performance in 1998. As of 12/31/98 there were 637 funds in the 1998
Morningstar database having a "Foreign Stock" objective and 166 funds with a
"Diversified Emerging Markets" objective. The average return among both groups
was 1.8% while the INTF's return for 1998 was 3.3%. If the adage of "buy low,
sell high" continues to be valid, then there have been many "bargains" overseas
since mid 1998, and there continue to be opportunities. International and
emerging markets have performed well in early 1999. It is likely to be a
roller coaster, but the potential is excellent.
<TABLE>
For periods ending 12/31/98.
<CAPTION>
Description Last Quarter One Year Two Year Avg. Annual Return
Three Year Avg. Annual Return Since Public Inception
(5/28/97) Since Private Inception (4/4/96)
<S> <C> <C> <C>
<C> <C>
<C>
International
Fund (INTF)
A mix of Inter
national equity-
oriented funds
including some
investing in
emerging
markets (fund
of funds).
Individual
stocks may be
owned. 16.5% 3.3% 3.1%
N/A -1.6%
6.0%
Lipper Inter
national Funds
Index 15.5% 12.7% 9.9%
N/A 6.2%
10.8%
Lipper Emerg
ing Markets
Funds Index 15.5% -26.9% -19.0%
N/A -28.0%
-13.1%
Dow World Ex.
U.S. Index 19.5% 13.4% 6.5%
N/A 4.7%
5.0%
</TABLE>
Portfolio Turnover .................................. 2.3%
* Total returns include reinvested dividends and gains.
AltCat (Alternative Categories) Fund (ACF)
The ACF includes some promising long-term investments that experienced
significant downturns in 1998. Energy, emerging markets and real estate were
losers, but were offset by technology, health care and domestic stocks. This
Fund is looking for opportunities in areas that do not fit neatly into the
other asset allocation categories. Again, the "buy low, sell high" adage may
apply, as may the roller coaster metaphor.
<TABLE>
For periods ending 12/31/98.
<CAPTION>
Description Last Quarter One Year Two Year Avg. Annual Return
Three Year Avg. Annual Return Since Public Inception
(5/28/97) Since Private Inception (4/4/96)
<S> <C> <C> <C>
<C> <C>
<C>
AltCat Fund
ACF)
The Alternative
Categories Fund
invests in a
wide range of
mixed global
assets including
mostly aggres
sive funds (fund
of funds),which
generally do not
fit into the
other major
categories. 8.3% -5.8% -1.1%
N/A -3.8%
0.9%
</TABLE>
Portfolio Turnover ........................................ 0%
* Total returns include reinvested dividends and gains.
Notes regarding performance: Total Return assumes dividends and/or capital
gains reinvested. STAAR Fund returns are based on Net Asset Value. Indexes
such as the DOW Jones Industrials, Lehman Bros. (LB) and Merrill Lynch (ML)
Bond indexes are unmanaged, and therefore have little or no expenses.
Lipper mutual fund indexes reflect net returns after expenses. Performance
numbers are quoted directly or derived from data published in the Wall St.
Journal ands other public sources and may be preliminary data. Past
performance is no guarantee of future results. Investment returns and
principal values fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
The STAAR Investment Trust, 604 McKnight Park Dr., Pittsburgh, PA 15237 412-367-
9076
Portfolio Holdings as of 12/31/98
1 SST INTERMEDIATE BOND FUND
Portfolio Valuation Date 12/31/1998
<TABLE>
<CAPTION>
Quantity Description UnitCost Price Cost MktVal
UnrealG/L % of Val.
<S> <C> <C> <C> <C> <C>
<C> <C>
205,758 Cash & Equiv. 100.00 100.00 205,758 205,758
0 16.6%
20,000 US Tr Nt 6.50 4/30/99 100.73 100.63 20,146 20,125
(21) 1.6%
45,000 US Tr Nt 6.25 8/31/00 98.97 102.53 44,535 46,139
1,604 3.7%
20,000 US Tr Nt 6.375 8/15/02 100.45 105.53 20,089 21,106
1,017 1.7%
20,000 US Tr Nt 6.5 5/15/05 100.19 109.56 20,037 21,912
1,875 1.8%
25,000 US Tr Nt 7.0 7/15/06 100.76 114.09 25,191 28,523
3,332 2.3%
20,000 US Tr Nt 5.5 2/15/08 100.42 105.97 20,084 21,194
1,110 1.7%
20,000 US Tr Nt 5.375 2/15/01 100.38 101.53 20,075 20,306
231 1.6%
50,000 US Tr Nt 5.5 12/31/00 102.69 101.69 51,344 50,844
(500) 4.1%
50,000 FHLMC Deb 6.49 12/19/05 100.70 102.00 50,350 51,000
650 4.1%
60,000 FHLMC Deb 6.25 6/24/08 100.00 100.31 60,000 60,188
188 4.9%
20,000 Fed Hm Ln Bk 6.17 7/30/02 102.22 103.75 20,433 20,750
307 1.7%
40,000 Fed Hm Ln Bk 5.94 1/30/01 99.82 100.06 39,929 40,025
96 3.2%
40,000 Fed Hm Ln Bk 5.925 8/14/03 100.98 100.78 40,391 40,312
(79) 3.3%
25,000 Fed Nat Mtg Ass 7.32 5/3/06 100.00 104.88 25,000 26,220
1,220 2.1%
25,000 Fed Nat Mtg Ass 7.52 4/23/04 101.39 100.71 25,348 25,178
(170) 2.0%
35,000 Fed Nat Mtg Ass 7.37 3/09/07 103.12 102.47 36,092 35,865
(227) 2.9%
75,000 Fed Nat Mtg Ass 5.39 11/5/03 99.56 98.57 74,672 73,928
(744) 6.0%
20,000 TVA Pwr 93Ser 6.125 7/15/03 97.00 102.19 19,400 20,4380
1,038 1.6%
13,000 TVA Pwr 95Ser 6.375 6/15/05 97.25 105.91 12,643 13,768
1,125 1.1%
25,000 Avco Fin Srv 7.375 8/15/01 102.00 104.96 25,500 26,240
740 2.1%
30,000 Columb/HCA Hlth 6.87 9/15/03 98.63 98.54 29,588 29,652
(26) 2.4%
20,000 DetEd SecMdTr59 6.27 3/15/00 100.00 100.82 20,000 20,164
164 1.6%
20,000 IBM NT BkEntNC 7.25 11/01/02 102.14 106.94 20,427 21,388
961 1.7%
25,000 M Lynch&Co Nts NC 8.0 2/1/02 103.50 106.85 25,875 26,713
838 2.2%
15,000 Morg Stnly Nt 6.375 12/15/03 96.90 102.91 14,535 15,437
902 1.2%
30,000 Stud Ln Mkt Ass 6.07 2/14/02 99.50 100.04 29,850 30,012
162 2.4%
40,000 Disney Co Nts 6.375 3/30/01 102.79 102.82 41,117 41,128
11 3.3%
20,000 BellSouth Comm 6.5 2/01/00 100.25 101.37 20,050 20,274
224 1.6%
80,000 Ford Mtr Cr 6.0 1/14/03 102.84 101.82 82,268 81,456
(812) 6.6%
40,000 Mellon Finl Co. 6.0 3/01/04 100.09 101.89 40,036 40,756
720 3.3%
40,000 Sears Acc Corp 6.92 6/17/04 104.80 106.41 41,920 42,564
644 3.4%
Total Account 1,222,693 1,239,273
16,580 100.0%
</TABLE>
Breakdown By General Asset Type
Cash & Equivalents = 10%
US Treasury & Gov't Agency = 53%
Corporate Bonds = 37%
Breakdown by General Rating
AAA Rated = 66%
AA Rated = 3%
A Rated = 26%
BBB Rated = 5%
<PAGE>
Page 9
2 SST LONG TERM BOND FUND Portfolio Valuation Date 12/31/98
<TABLE>
<CAPTION>
Quantity Description UnitCost Price Cost MktVal
UnrealG/L % of Val.
<S> <C> <C> <C> <C> <C>
<C> <C>
3,017 Cash & Equiv. 1.00 1.00 3,017 3,017
0 0.5%
10,000 US Tr Nt 5.625 2/15/06 92.70 105.78 9,270 10,578
1,308 1.7%
75,000 US Tr Nt 7.25 5/15/16 105.59 121.13 79,194 90,844
11,650 15.0%
25,000 US Tr Nt 7.125 2/15/23 100.88 123.03 25,219 30,758
5,539 5.1%
15,000 US Tr Nt 6.875 8/15/25 99.99 121.44 14,998 18,216
3,218 3.0%
20,000 US Tr Nt 7.25 8/15/22 100.81 124.31 20,163 24,863
4,700 4.1%
10,000 US Tr Nt 6.25 8/15/23 104.86 111.88 15,730 16,781
1,051 2.8%
20,000 FHLMC 7.375 10/25/11 99.50 101.34 19,900 20,269
369 3.3%
35,000 FHLMC 6.85 5/14/13 100.28 101.41 35,099 35,492
393 5.9%
30,000 FHLMC 6.42 8/19/13 101.26 100.72 30,378 30,215
(163) 5.0%
25,000 FHLMC 6.7 2/15/11 102.94 101.81 25,734 25,453
(281) 4.2%
15,000 Bankamer Corp MTN 6.5 5/6/13 100.00 100.13 15,000 15,020
20 2.5%
20,000 Bear St MtnTr798 7.4 11/20/17 100.00 100.13 20,000 20,014
14 3.3%
15,000 Chase Man Corp MTN 6.5 5/6/13 100.25 99.58 15,037 14,937
(100) 2.5%
35,000 Citicorp 7.2 9/15/10 102.38 101.47 35,831 35,514
(317) 5.9%
20,000 Disney Mtn Semi 7.75 9/30/11 100.00 101.58 20,000 20,316
316 3.4%
10,000 FPL Grp Cap Inc 7.625 5/01/13 100.26 103.84 10,025 10,384
359 1.7%
40,000 Ford Mtr Cred MTN 7.0 9/20/10 101.00 102.35 40,400 40,940
540 6.8%
25,000 GE Cap Corp 6.4 1/16/13 99.75 100.05 24,938 25,012
74 4.1%
20,000 Gen Mot Corp Nts 7.10 3/15/06 99.31 108.40 19,861 21,680
1,819 3.6%
15,000 Morgn Stnly Cap Gr 7.45 7/3/12 100.00 101.01 15,000 15,152
152 2.5%
15,000 So.Westn Bell Deb 6.75 6/01/08 96.25 100.83 14,438 15,125
687 2.5%
30,000 Xerox Cr Corp MTN 6.5 1/28/13 100.00 101.03 30,000 30,309
309 5.0%
35,000 Xerox Cr Corp MTN 6.5 2/11/13 100.00 101.07 35,000 35,375
375 5.8%
Total
Account 574,232 606,264
32,032 100.0%
</TABLE>
Breakdown By General Asset Type
Cash & Equivalents = 1%
US Treasury & Gov't Agency = 50%
Corporate Bonds = 49%
Breakdown by General Rating
AAA Rated = 54%
AA Rated = 3%
A Rated = 43%
BBB Rated = 5%
<PAGE>
Page 10
3 SST LARGER COMPANY STOCK FUND Portfolio Valuation Date 12/31/98
<TABLE>
<CAPTION>
Quantity Description UnitCost Price Cost MktVal
UnrealG/L % of Val.
<S> <C> <C> <C> <C> <C>
<C> <C>
139,226 Cash & Equiv. 1.00 1.00 139,226 139,226
0 7.5%
U.S. Lar
ger Comp
any Stoc
k Mutual
Funds
5726 Bear Stearns S&P Stars A 20.42 22.97 116,900 131,525
14,625 7.1%
1869 Clipper Fund 69.35 75.37 129,604 140,857
11,253 7.6%
2857 Franklin Growth Fund Cl 1 24.92 31.45 71,192 89,860
18,668 4.9%
5007 Fundamental Investors Fund 25.09 28.92 125,604 144,800
19,196 7.8%
1238 Janus Twenty Fund 44.87 53.30 55,538 65,972
10,434 3.6%
31355 Putnam Investors A Fund 12.87 14.82 403,414 464,683
61,269 25.1%
3877 Torray Fund 35.08 36.48 136,023 141,444
5,421 7.6%
6315 Washington Mutual Investors 25.54 32.91 161,308 207,843
46,535 11.2%
U.S. Lar
ger Comp
any Stoc
k Unit
Trusts
9478 Peroni Top 10 Grwth Tr 98 Ser 9.96 11.89 94,372 112,728
18,356 6.1%
U.S. Mi
d-Cap L
arger
Company
Stocks
1630 Mairs and Power Growth Fund 69.81 92.68 113,821 151,108
37,287 8.2%
1054 Strong Schafer Value Fund 60.18 59.29 63,416 62,475
(941) 3.4%
Total
Account 1,610,418 1,852,521
242,103 100%
</TABLE>
Breakdown By General Asset Type
(Includes estimated cash positions of mutual funds owned by the Fund)
Cash & Equivalents = 7%
Domestic Stock = 86%
Foreign Stock = 3%
Bonds = 1%
Other = 3%
Breakdown by Management Style
Large Cap Growth = 43%
Large Cap Value = 34%
Large Cap Blend = 5%
Larger Mid Cap Value = 3%
Larger Mid Cap Blend = 8%
Cash Equiv. = 7%
Notes: Breakdown percentages are estimates based on information gathered from
prospectuses, quarterly reports and other sources, including Morningstar
Principia for Mutual Funds. Accuracy is not guaranteed.
<PAGE>
Page 11
4 SST SMALLER COMPANY STOCK FUND Portfolio Valuation
12/31/98
<TABLE>
<CAPTION>
Quantity Description UnitCost Price Cost MktVal
UnrealG/L % of Val.
<S> <C> <C> <C> <C> <C>
<C> <C>
47864 Cash & Equiv. 1.00 1.00 47,864 47,864
0 3.0%
U.S.
Small
er
Com
pany
Stock
Mutu
al
Fund
s
9261 Acorn Fund 16.25 16.85 150,510 156,045
5,535 9.7%
11156 Frnkln Small Cap Growth Fd I 20.27 22.57 226,080 251,788
25,708 15.6%
9986 Ivy Emerging Growth Fund A 26.50 32.65 264,628 326,052
61,424 20.2%
9103 SSGA Small Cap Fund 19.30 19.41 175,739 176,696
957 10.9%
U.S.
Mid-
Cap
small
er
Com
pany
Stock
s
11323 Putnam Cap. Apprec. Fund A 22.70 22.66 257,028 256,585
(443) 15.9%
5648 T Rowe Price New Horizons Fd 23.76 23.34 134,192 131,831
(2,361) 8.2%
U.S.
Micr
ocap
Stock
Mutu
al
Fund
s
13838 Frnkln Microcap Value Fund I 19.42 19.31 268,678 267,217
(1,461) 16.6%
Total
Account 1,524,719 1,614,078
89,359 100%
</TABLE>
Breakdown By General Asset Type
(Includes estimated cash positions of mutual funds owned by the Fund)
Cash & Equivalents = 3%
Domestic Stock = 93%
Foreign Stock = 4%
Bonds = 0%
Other = 0%
Breakdown by Management Style
Small Cap Growth = 43%
Small Cap Value = 17%
Small Cap Blend = 11%
Smaller Mid Cap Growth = 10%
Smaller Mid Cap Blend = 16%
Cash equiv. = 3%
Notes: Breakdown percentages are estimates based on information gathered from
prospectuses, quarterly reports and other sources, including Morningstar
Principia for Mutual Funds. Accuracy is not guaranteed.
<PAGE>
Page 12
5 SST INTERNATIONAL FUND Portfolio Valuation Date 12/31/98
<TABLE>
<CAPTION>
Quantity Description UnitCost Price Cost MktVal
UnrealG/L % of Val.
<S> <C> <C> <C> <C> <C>
<C> <C>
32867 Cash & Equiv. 1.00 1.00 32,867 32,867
0 2.0%
Inter
natio
nal
Stock
Mutu
al
Fund
s
5464 Europacific Fund 26.20 28.40 143,148 155,183
12,035 9.6%
6339 Hotchkis & Wiley Int'l Fund 22.29 23.28 141,317 147,570
6,253 9.2%
6496 Ivy International Fund 35.92 41.20 233,321 267,646
19,922 21.2%
17088 Putnam Int'l Growth Fund A 18.22 19.23 311,355 328,600
17,245 20.4%
10201 T R Price Int'l Stock Fund 13.64 14.99 139,150 152,919
13,769 9.5%
22866 Templeton Foreign Fund I 10.04 8.39 229,559 191,844
(37,715) 11.9%
9151 Warburg Pincus Int'l Eq Fd 19.35 17.79 177,065 162,804
(14,261) 10.1%
Develop
ing Mar
kets Mu
tual
Funds
16468 Templeton Devel. Mkts Tr I 14.32 10.30 235,830 169,617
(66,213) 10.5%
Total
Account 1,643,612 1,609,050
(34,562) 100%
</TABLE>
Breakdown By General Asset Type
(Includes estimated cash positions of mutual funds owned by the Fund)
Cash & Equivalents = 2%
Domestic Stock = 1%
Foreign Stock = 89%
Bonds = 1%
Other = 7%
Breakdown by Management Style
Large Cap Value = 68%
Large Cap Blend = 19%
Small Cap Value = 11%
Cash Equiv. = 2%
Notes: Breakdown percentages are estimates based on information gathered from
prospectuses, quarterly reports and other sources, including Morningstar
Principia for Mutual Funds. Accuracy is not guaranteed.
<PAGE>
Page 13
6 SST ALTCAT FUND Portfolio Valuation 12/31/98
<TABLE>
<CAPTION>
Quantity Description UnitCost Price Cost MktVal
UnrealG/L % of Val.
<S> <C> <C> <C> <C> <C>
<C> <C>
23829 Cash & Equiv. 1.00 1.00 23,829 23,829
0 6.4%
U.S.
Mid-
Cap
Large
r
Com
pany
Stock
Mutu
al
Fund
s
1091 Muhlenkamp Fund 34.49 37.65 37,618 41,062
3,444 11.0%
Glob
al
Small
er
Co.
Stock
Mutu
al
Fund
s
2257 Mutual Series Discovery Fd I 18.44 17.19 41,615 38,801
(2,814) 10.4%
446 Small Cap World Fund I 25.97 27.64 11,576 10,977
(599) 2.9%
Alter
nativ
e
Cate
gorie
s
484 Franklin Gold Fund I 14.50 7.72 7,020 3,737
(3,283) 1.0%
1699 Frnkln Real Estate Sec Fd I 14.60 14.32 24,806 24,332
(474) 6.5%
2715 Frnkln Nat. Resources Fd I 14.68 10.50 39,861 28,507
(11,354) 7.6%
955 Invesco Strategic Tech Fd 31.41 34.99 30,000 33,419
3,419 8.9%
6669 Ivy China Region Fund A 8.50 6.30 56,684 42,014
(14,670) 11.2%
3802 Templeton Latin Amer Fund I 11.44 7.12 43,505 27,071
(16,434) 7.2%
1276 Templeton Global Real Est I 14.45 13.67 18,426 17,438
(988) 4.7%
1217 Vanguard Special Energy Fund 22.27 18.42 27,112 22,422
(4,690) 6.0%
624 Vanguard Special Health Fund 75.18 96.85 46,881 60,396
13,515 16.1%
Total
Account 408,933 374,005
(34,928) 100%
</TABLE>
Breakdown By General Asset Type
(Includes estimated cash positions of mutual funds owned by the Fund)
Cash & Equivalents = 6%
US Flexibly managed = 11%
Global fexibly Managed = 10%
Global smaller Cos. = 3%
Pacific Rim/China = 11%
Latin America = 7%
Specific Energy/Natural Resources = 14%
Prec. Metals/Mining = 1%
Real Estate & Related = 11%
Specific Health Care = 17%
Specific Technology = 9%
Breakdown by Management Style
Large Cap Growth = 16%
Mid Cap Growth = 9%
Mid Cap Value = 65%
Mid Cap Blend = 1%
Small Cap Growth = 3%
Cash Equiv. = 6%
Notes: Breakdown percentages are estimates based on information gathered from
prospectuses, quarterly reports and other sources, including Morningstar
Principia for Mutual Funds. Accuracy is not guaranteed.
<PAGE>
STAAR SYSTEM- TRUST
STATEMENT OF OPERATIONS
12 MONTH PERIOD ENDING DECEMBER 31, 1998
(Total, Six Series Funds)
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income
Mutual fund dividends $ 66,820
Interest and money market
fund dividends 77,962
Total Income $144,782
Expenses
Investment advisory fees (Note 5) $ 51,572
Directors fees, filing, tax (Note 5) $ 5,632
Foreign Taxes Paid $ 2,877
Interest $ 0
Marketing/Distrib. 12b-1 $ 24
Other Expenses $ 387
Total Expenses $ 60,492
Investment income-net $ 84,290
Realized and unrealized appreciation on
investments
Realized long and short term capital gains $178,138
Unrealized appreciation (depreciation) $ 51,116
Net Realized and Unrealized
Appreciation (Depreciation) $229,254
Net increase in net assets resulting
from operations $313,544
</TABLE>
NOTE: The accompanying notes are an integral part of these financial
statements.
<PAGE>
Page 15
STAAR SYSTEM TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period
From
Inception
Year Ended Year Ended (3/19/96)
December 31, December 31, Through
1998 1997 12/31/96
<S> <C> <C> <C>
Increase in net assets from
operations:
Investment income- net $ 84,290 $ 93,962 $ 42,940
Net realized gain on
investments $ 178,138 $ 141,856 $ 46,523
Unrealized appreciation of
investments $ 51,116 $ 188,631 $ 70,817
Net increase in net assets
resulting from operations $ 313,544 $ 424,449 $ 160,280
Distributions to shareholders
from:
Investment income $( 86,735) $( 87,129) $( 38,885)
Realized long term gains $(170,740) $(141,856) $( 46,523)
Total distributions $(257,475) $(228,985) $( 85,408)
Capital share transactions
(Note 3)
Purchases $2,624,793 $2,044,858 $2,465,597
Redemptions $( 585,695) $( 238,765) $( 10,000)
Reinvestment of dividends $ 255,605 $ 228,985 $ 85,408
Net increase in net assets
resulting from capital
share transactions $2,294,703 $2,035,078 $2,541,005
Total increase in net assets $2,350,772 $2,231,231 $2,615,877
Net assets
Beginning of period $4,847,108 $2,615,877 $ 0
End of period $7,197,880 $4,847,108 $2,615,877
</TABLE>
NOTE: The accompanying notes are an integral part of these financial
statements.
<PAGE>
Page 16
STAAR SYSTEM TRUST
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
Net increase in cash from operations $ 313,544
Adjustments required to reconcile to net cash
provided by operating activities:
Unrealized appreciation of investments (51,116)
(Increase) decrease in:
Bond Interest Receivable (9,266)
Increase (Decrease) in:
Accrued Interest 706
Taxes Payable (0)
Accounts Payable 118,586
Net cash provided by operating
activities 372,454
Cash provided (used) by investment activities
Investments Purchased (3,113,378)
Sales or redemptions 843,741
Net cash (used) by investment activities (2,269,637)
Cash provided (used) by financing activities
Shareholder Contributions 2,624,793
Shareholder Redemptions (including $158,682
Re-invested in other Trust Funds) (585,696)
Dividends declared (257,476)
Dividends reinvested by shareholders 255,586
Net cash provided by financing activities 2,037,207
Increase (Decrease) in Cash During Period 140,024
Cash Balance - beginning of period 312,536
Cash Balance - end of period $ 452,561
</TABLE>
NOTE: The accompanying notes are an integral part of these financial
statements.
<PAGE>
Page 17
STAAR SYSTEM TRUST
NOTES TO FlNANClAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - ORGANIZATION AND PURPOSE
Staar Investment Trust (the Trust) was organized as a Pennsylvania business
trust under applicable statutes of the Commonwealth of Pennsylvania. It
was formed on February 28, 1996 and became effective March 19, 1996.
The Trust is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940 as a
non-diversified, open-end management investment company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Trust consists of six separate series portfolios (funds). The funds are
organized in such a manner that each fund corresponds to a standard asset
allocation category, with the exception of the Alternative Categories Fund
which is a flexibly managed fund that may invest in assets not included in
the other funds. The Funds are:
The STAAR Intermediate Bond Fund
The STAAR Long-Term Bond Fund
The STAAR Larger Company Stock Fund
The STAAR Smaller Company Stock Fund
The STAAR International Fund
The STAAR Alternative Categories Fund
Each fund is managed separately and has its own investment objectives and
strategies in keeping with the asset allocation category for which it is
named. Each fund may invest in other open-end funds (mutual funds) as
well as closed-end funds and individual securities.
Security Valuation - Investments in mutual funds are stated at net asset
value on the date of valuation. Securities traded on a national securities
exchange (or reported on the NASDAQ national market) are stated at the
last reported sales price on the day of valuation; other securities traded
in the over-the-counter market and listed securities for which no sale was
reported on that date are stated at the last quoted bid price. Short-term
notes are stated at amortized cost, which is equivalent to value. Restricted
securities and other securities for which quotations are not readily
available will be valued at fair value as determined by the Trustees.
Federal Income Taxes - The Trust complies with the requirements of the
Internal Revenue Code that are applicable to regulated investment
companies and distributes all its taxable income to its shareholders.
Therefore, no federal or state income tax provision is required.
Distributions to shareholders - Dividends to shareholders are recorded on
the ex-dividend date.
Other - The Trust follows industry practice and records
security transactions on the trade date. Dividend income is recognized on
the ex-dividend date, and interest income is recognized on the accrual
basis. Discounts and premiums on securities purchased, if significant, are
amortized over the life of the respective securities.
Use of 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 disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.
NOTE 3 - SHAREHOLDER TRANSACTIONS
The declaration of Trust provides for an unlimited number of shares of
beneficial interest, without par value. The declaration of Trust also
established six series of shares which correspond to the six funds described
in Note 2. During the years ended December 31, 1998 and 1997, 99% and 100%
of dividends declared were reinvested by the respective
owners of beneficial interest. Transactions in units of beneficial
interest were as follows:
<TABLE>
<PAGE>
Page 18
STAAR INVESTMENT TRUST SHAREHOLDER TRANSACTIONS
YEAR ENDED 12/31/98
<CAPTION>
Fund December 31, 1997 Balance Sold Reinvestment Of Dividends
Redemption December 31, 1998 Balance
Shares Amount Shares Amount Shares Amount Shares
Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
<C> <C> <C> <C>
Intermediate
Bond Fund 60,904 $ 605,200 52,286 $ 547,135 3,932 $ 40,840
(6,765) $ (70,349) 110,356 $1,122,826
Long-Term
Bond Fund 31,339 $ 315,763 22,345 $ 245,762 2,372 $ 26,169
(2,445) $ (27,482) 56,611 $ 560,212
Larger
Company
Stock Fund 104,889 $1,131,829 45,157 $ 571,825 7,679 $ 99,910
(15,216) $(190,149) 142,510 $1,613,415
Smaller
Company
Stock Fund 102,877 $1,075,143 45,382 $ 522,933 3,628 $ 41,616
(11,000) $(114,493) 140,886 $1,525,199
International
Fund 107,214 $1,145,174 53,791 $ 588,719 3,500 $ 37,310
(12,771) $(131,184) 151,734 $1,640,019
Alternative
Categories
Fund 29,151 $ 302,974 14,010 $ 148,420 1,001 $ 9,741
(5,520) $( 52,039) 38,641 $ 409,096
Total
Amount $4,576,083 $2,624,794 $ 255,586
$(585,696) $6,870,767
</TABLE>
Net undistributed investment income (loss) for each fund as of December
31, 1998 was as follows:
IBF $14,097
LTBF $ 6,040
LCSF $(3,943)
SCSF $(1,691)
INTF $ 2,394
ACF $ (368)
NOTE 4 - SUMMARY OF UNREALIZED GAINS AND LOSSES:
Following is a summary of unrealized gains and losses for each portfolio as
of December 31, 1998:
<TABLE>
<Caption
_____Unrealized___
Market
Cost Gain Loss Net Value
<S> <C> <C> <C> <C> <C>
Intermediate Bond $1,222,693 19,159 $ (2,579) $ 16,580 $1,239,273
Long Term Bond 574,232 32,893 (861) 32,032 $ 606,264
Larger Company
Stock Fund 1,610,418 243,044 (941) 242,103 1,852,521
Smaller Company
Stock Fund 1,524,719 93,624 (4,265) 89,359 1,614,078
International Fund 1,643,612 83,627 (118,189) (34,562) 1,609,050
AltCat 408,933 20,378 (55,306) (34,928) 374,005
TOTAL $6,984,607 $492,725 $(182,141) $310,584 $7,295,191
</TABLE>
<PAGE>
Page 19
NOTE 5 - INVESTMENT ADVISORY FEES AND OTHER
TRANSACTIONS WITH AFFILIATES: Effective
April 1, 1996, the Trust entered into a Master Investment Advisory
Agreement with STAAR Financial Advisors, Inc., a related party
(advisor). This agreement appointed the Advisor to act as investment
advisor to the Trust on behalf of six series portfolios for a one year
period. This agreement has subsequently been extended through April 1,
2000. The advisor furnishes investment management and advisory services
(rate varies for each portfolio in accordance with a fee schedule ranging
from .63% to .90% of average daily net asset value). During the period ended
December 31, 1998, the investment advisor waived fees as follows:
<TABLE>
<CAPTION>
Amount of Fees Waived
Fund FeesWaived Per Share
<S> <C> <C>
Intermediate Bond Fund $1,033 $ .01
Long Term Bond Fund 603 .01
</TABLE>
The president of the investment advisor is the organizer of the Trust. The
agreement provides for an expense reimbursement from the investment advisor
if the Trust's total expense for any series (fund), exclusive of taxes,
interest, costs of portfolio acquisitions
and dispositions and extraordinary
expenses, for any fiscal year, exceed the level of expenses which such
series is permitted to bear under the most restrictive expense limitation
imposed on open-end investment companies by any state in which shares of
such series are then qualified. The agreement also stipulates that all
organization expenses of the Trust are paid by the investment advisor as
well as certain marketing, legal and accounting and transfer and custodial
services for the first two years and longer if approved by both parties on
an annual basis.
The STAAR Investment Trust is also charged 0.09% of the average daily net
asset value for each Fund for various Trust expenses; from this the
Trustees are compensated as a group at a rate of $1,125
per calendar quarter.
Certain affiliated persons held aggregate investments in the respective
portfolios as of December 31, 1998 as follows:
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
Intermediate bond fund 3,937.382 $ 41,146
Long term bond fund 2,085.392 23,273
Larger company stock fund 10,678.327 138,711
Smaller company stock fund 16,459.801 188,465
International fund 16,332.305 173,122
Alternative categories fund 3,844.234 37,174
</TABLE>
Effective September 1, 1998, the Trust received approval of a 12b-1
arrangement which provides fee (commission) payments to broker/dealers
who refer investors who become shareholders in the Trust. The fee
structure is .5% for the bond funds and 1.0% for the stock funds over the
first 12 months from date of purchase and .15% for bond funds and .25% for
stock funds per year thereafter. Fees are calculated based on fair market
values and arew payable monthly the first 12 months and quarterly
thereafter. Total 12b-1 expense for 1998 was $24.
CARSON & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
P.O. BOX 395
201 VILLAGE COMMONS
SEWlCKLEY, PA 15143
(412) 741-8588
FAX (412) 741-0833
Independent Auditor's Report
To the Shareholders and Trustees
STAAR Investment Trust
We have audited the statement of assets and liabilities, including the
schedules of investments of STAAR Investment Trust (comprising,
respectively,
the Intermediate Bond Fund, Long Term Bond Fund, Larger Company
Stock Fund, Smaller Company Stock Fund, International Fund and
Alternative Categories Fund) as of December 31, 1998, and the
related statements of operations and cash flows for the period then ended,
the statement of changes in net assets for the period then ended, and the
selected per share data and ratios for the period then ended. These
financial statements and per share data and ratios are the responsibility
of the Trust's management. Our responsibility
is to express an opinion on these
financial statements and per share data and ratios based on our audit.
We conducted our audit 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 per
share data and ratios 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 December 31, 1998 by
correspondence with the custodians. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and
ratios referred to above present fairly, in all material respects, the
financial position of each of the respective portfolios constituting the
STAAR Investment Trust as of December 31, 1998, the results of their
operations
and their cash flows for the period then ended, the changes in their net
assets for the period then ended, and
the selected per share data and ratios
for the period then ended, in conformity with generally accepted accounting
principles.
Sewickley, PA
February 26, 1999
Offices of the Trust
604 McKnight Park Dr.
Pittsburgh, PA 15237
Investment Advisor
STAAR Financial Advisors, Inc.
604 McKnight Park Dr.
Pittsburgh, PA 15237
E-Mail: [email protected]
Web Site: www.staarinvest.com
Transfer Agent for Shareholder Accounts
STAAR Financial Advisors, Inc.
604 McKnight Park Dr.
Pittsburgh, PA 15237
Counsel
Alan Lefkowitz
Kabala & Geeseman
200 First Ave., Pittsburgh, PA 15222
Independent Auditors
Carson & Co.
201 Village Commons, Sewickley, PA 15143
Trustees
Ronald G. Benson
Coraopolis, PA
Business Consultant
Regional Coordinator, Fellowship of Companies for Christ, International
Jeffrey A. Dewhirst
Sewickley, PA
Investment Banker, Corporate Finance Associates
Thomas J. Smith
Sewickley, PA
Owner/President, CapMasters
John H. Weisbrod
Cranberry, PA
Former President, Sea Breeze Laboratories, Inc.
J. Andre Weisbrod
Wexford, PA
President, STAAR Financial Advisors, Inc.
