KALMAR
POOLED
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TRUST
===================
LOGO (GRAPHIC OMITTED)
KALMAR "GROWTH-WITH-VALUE" SMALL CAP FUND
ANNUAL REPORT
DECEMBER 31, 1998
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
REPORT FROM MANAGEMENT
DEAR FELLOW SHAREHOLDERS AND FRIENDS:
The returns from the Kalmar "Growth-with-Value" Small Cap Fund, along with most
other small company investment vehicles, was negative last year, as can be seen
below. In fact, 1998 represented the all time widest negative differential
between the returns on small company stocks and the return of the S&P 500.
Despite that, please note that your Fund's total return since inception has
significantly exceeded its peers in the form of the two most recognized small
company investment benchmarks.
COMPARATIVE PERFORMANCE
<TABLE>
<CAPTION>
INCEPTION TO DATE ONE YEAR LATEST QUARTER
TOTAL RETURN 4/11/97 TO 12/31/98 12/31/97 TO 12/31/98 9/30/98 TO 12/31/98
- ------------ ------------------- -------------------- -------------------
<S> <C> <C> <C>
Kalmar Small Cap Fund +35.13% -7.66% +14.27%
Russell 2000 Index +24.60% -2.55% +16.31%
Lipper Small Cap Index +24.94% -0.85% +18.49%
S&P 500 Index +66.61% +28.57% +21.29%
</TABLE>
1998 itself was a frustrating year when an increasingly narrow list of mega-cap
stocks, made up primarily of giant technology and drug companies, plus
skyrocketing Internet speculations, drove the major stock indices to record
highs while most other stocks languished. This absence of public interest in
small company stocks particularly disadvantaged your fund, whose median market
capitalization was only about $340 million for the year. Ironically and
atypically, your Fund's long-term investment orientation and resulting low 27%
turnover also handicapped its 1998 performance, given the extreme volatility of
positive to deeply negative to positive quarterly returns and rapid rotation of
industry groups in and out of favor. That said, a benefit of low turnover was
that it enabled us to avoid burdening shareholders with unnecessary capital
gains tax liabilities in a year of poor returns. Unlike the typical fund with
far higher turnover, we were able to fully offset realized capital gains within
the portfolio with prudently harvested losses.
Discussion of other factors influencing your Fund's 1998 performance as well as
the outlook for small company investment generally can be found beginning on
page three. But first we examine the big picture to see how it has evolved since
mid-year 1998 and to provide the backdrop for our later remarks. As we do this,
please keep in mind that, in the opinion of your management team, the recent
discouraging performance of small cap stocks is setting the springboard for a
period of major potential outperformance -- as positive stock market breadth
develops and as the strong fundamental growth and profitability of your
portfolio companies shine through.
BIG PICTURE OUTLOOK
As 1999 commences, even a master of understatement would have to admit that we
are experiencing very unusual times!
The U.S. economy continues to defy widespread forecasts of a slowdown, despite
stiff international trade headwinds against our exports. Our stock market roars
back from the third quarter's financial confidence crisis "Bear Market" as if
there never was one and as if the risks of deflation never existed. The S&P 500
racks up its fourth straight year of heady 20%-plus gains while, in stark
contrast, the relative underperformance differential of small stocks widens to
an all time record, producing negative returns of 3% for the Russell 2000.
Persistently slowing S&P 500 earnings appear to lose fundamental influence, as
Liquidity and Momentum push U.S. major market averages to ever higher records.
President Clinton's impeachment trial commences in the Senate with almost
complete public disinterest. Internet stocks soar on widespread public
speculation more rampant than anything since the tulip bulb craze, demonstrating
again that Main Street, not
1
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KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
REPORT FROM MANAGEMENT -- CONTINUED
Wall Street, drives today's market. The Euro is born amidst great optimism about
regional economic synergy, yet short run growth is perceptibly slowing. World
wide commodity prices continue to plumb lower and lower depths, debilitating
most non-industrial economies. Brazil, the eighth largest economy in the world
and purported lynchpin to Latin American economic and currency stability, flunks
out on the I.M.F. rescue plan and, after a moment of shock, world markets merely
shrug.
These seeming contradictions and crosscurrents demonstrate once again why
investing based on elaborate big picture forecasts is frequently fruitless.
Still, for good research and stock picking to produce positive short run returns
the general investment outlook needs to be at least neutral. In that regard, the
important big picture considerations remain in the benign range we described for
you during the second half of 1998. We briefly summarize those comments, with
our updated observations following in parentheses:
(BULLET) The U.S. economy has entered a period of slowing growth but should
continue to expand well into 1999, at least. (Manufacturing did indeed
shrink substantially, but now appears to be stabilizing; robust
consumer spending supported strong overall growth; there is so much to
like about the U.S. economy!)
(BULLET) Inflation will remain subdued but it is not likely to decline further,
as manufacturing/commodity deflation is offset by gradually rising
labor cost/health care/service sector inflation. (Ditto today.)
(BULLET) Interest rates should remain in a range not far from current levels.
(Ditto again.)
(BULLET) The dollar will remain firm and in demand until the escalating U.S.
trade deficit attracts greater notice, perhaps early next year. (Now it
IS next year and, as the world's dominant importer, a massive overhang
of U.S. dollars is building in non-U.S. financial markets; this is a
recipe for dollar vulnerability.)
(BULLET) Other industrial economies will soon feel more of the force of Asia's
troubles, causing greater global slowing. (Aggressive easing by G-7
monetary authorities is working to offset this risk; Asia is
stabilizing now.)
(BULLET) Business profits will continue to slow, encouraging corporate
managements to embark on another round of restructuring, accompanied by
more recurring "non-recurring" charges. (Ditto; the best case for
overall 1999 earnings is up modestly, but the next important
directional change for earnings should be a return to UP GENERALLY.)
(BULLET) China and Japan represent the big Asian risks now, with hopefully no
more competitive devaluations to come; cross your fingers. (They are
still crossed; but more comfortably about Asia, nervously about Latin
America.)
(BULLET) The big U.S. and European engines of growth can continue to carry the
World economy but it's not getting easier. (Excluding Japan, the
industrial world should continue its impressive performance.)
(BULLET) The "Goldilocks" economic scenario is getting weaker and harder to
maintain, while the major stock market averages move even further into
uncharted territory. (Remains true AND scary; excluding the effect of
the dramatically widening risk premium, investor recognition of this
conflict caused the third quarter stock market correction.)
(BULLET) Since the Earnings prop under the stock market has weakened, this makes
greater attention to the Liquidity and Sentiment drivers even more
critical for investment strategy. It's the Main Street investing public
and their unprecedented cash flows, not the professionals, that will
determine the big moves
2
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KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
REPORT FROM MANAGEMENT -- CONTINUED
in this market. (Say "Amen, Brother, Amen"; this has been the most
underestimated influence on the Bull Market; ultimately it is the most
dangerous one too, but seemingly has more room to go.)
INFLUENCES ON 1998 PERFORMANCE AND SMALL COMPANY INVESTMENT OUTLOOK
The painful irony about 1998 from the perspective of small growth company
investing is that, despite the fact that the positive fundamental preconditions
for a shift to small stock leadership had been in place for nearly two years, it
simply hasn't happened yet. Worse than that, mega-cap mania is so strongly
entrenched in the public mind that last year was the worst one in history for
both the S&P Small Cap Index and the Russell 2000 relative to the S&P 500.
Witness the huge divergence in performance between the largest and smallest
companies as measured by market capitalization. Never mind how good their
businesses, how much growth and progress your companies were generating, or how
appealingly valued their stocks were both absolutely and relatively, the smaller
they were, the worse they performed last year. The bad news for 1998 was that
with your Fund's median market capitalization of only $340 million, generating
positive performance was virtually impossible. The good news for the future is
that this irrationally skewed market action can only last so long -- which of
course is the big longer-term opportunity.
<TABLE>
<CAPTION>
PERFORMANCE BY CAPITALIZATION TIER
(AS OF 12/31/98)
- -------------------------------------------------------------------------------------------------
Capitalization Tiers Unweighted Average Decline from Number of Issues
Performance 52 Week High
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(LESS THAN) $250 Million -24.14% 49.84% 5508
$250 Million - $2 Billion -16.63% 25.73% 1860
$2 Billion - $5 Billion -6.11% 17.96% 372
$5 Billion - $20 Billion +6.19% 14.90% 274
(MORE THAN) $20 Billion +25.94% 9.95% 116
- -------------------------------------------------------------------------------------------------
<FN>
COURTESY OF SALOMON SMITH BARNEY
</FN>
</TABLE>
Let's remind ourselves of the fundamental positives that have been favoring
small cap stocks in an attempt to understand why they haven't pulled their
weight better in the market recently. The list is quite long, so we'll tick the
plusses off in summary fashion:
(BULLET) FED easing has always been a particular positive for small caps versus
larger caps; the FED cut rates three times since last fall.
(BULLET) The earnings growth of small companies as a class has been better than
large caps for nine quarters until the third quarter when it went
negative; small cap sales growth has stayed better; superior relative
earnings growth normally produces outperformance.
(BULLET) Relative valuations of small stocks are at all time historic lows; in
contrast, valuations of the largest companies are at stratospheric all
time highs; by themselves valuations don't predict leadership changes,
but they are a necessary precondition.
(BULLET) Market leadership shifts are often born out of major declines like last
fall -- or the next one following what may be a mega-cap-internet
blowoff ?
3
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KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
REPORT FROM MANAGEMENT -- CONTINUED
(BULLET) IPO issuance competes with existing small company stocks for investment
dollars; this activity is and has been low (though the "calendar" is
building again).
(BULLET) After having gone sharply negative during last Fall's confidence crisis
correction, small company mutual fund cash flows have again turned
positive; a performance shift requires fuel, but with such low
valuations and with the small cap universe comprising such a tiny
proportion of the total U.S. market capitalization, not much
incremental fuel will be required to create small cap fireworks.
(BULLET) Cash levels within small cap mutual fund portfolios have increased from
twenty-year lows last March; again, dry powder is required to fuel
incremental demand.
(BULLET) Institutional and individual tax loss selling is behind us.
(BULLET) Virtually all small companies, however domestically focused their
businesses, are affected by foreign trade problems in secondary ways;
still, their relatively greater domesticity versus large companies
should be an advantage given Asian and Latin American recessions.
(BULLET) Finally, while public interest in small caps has been minimal,
heightened takeover activity and company stock repurchases, plus heavy
insider buying by small cap managements, all suggest that the
go-forward opportunities appear powerful to the "smart money".
With so many positives at work for small company stocks, except of course for
popular interest and price momentum itself (which draws more and more fresh
investor cash and is thus self-reinforcing), what was the fly in the ointment
that kept better small stock performance from developing? Again, excepting
momentum, we conclude that it may have been recent high earnings risk in small
companies -- particularly when one remembers that changes in earnings
expectations (i.e., change in the rate of change) is more important to stock
performance than the absolute rate of company earnings growth. Indeed, in 1998,
taken as a group, there was an unexpectedly large negative change in small
company earnings expectations, particularly compared to the largest companies.
When one examines earnings estimate data from several national brokerage firms,
it appears that their average 1998 forecast for small company earnings fell by
about 22% from beginning to end of year and that this was concentrated in the
second half. This sharp reduction in expectations was meaningfully larger than
the approximate 6% decline for their mid-cap and large-cap universes. Similarly,
the percentage of what we call "earnings accidents", or unforeseen large drops
in the outlook for a given company, was greatly more prevalent among small
companies. It appears that the percentage of small companies whose consensus
earnings forecasts were reduced by 20% or more was nearly 35%, versus only about
14% for the mid- and large-cap groups together. While we do not have historical
back-up for this comment, the magnitude of both 1998 small cap negative earnings
changes AND their "accident rate" seems abnormally high to us.
Supporting the notion that greater comparative earnings risk may have been an
important determining factor in small cap underperformance is the differing
price impact recent earnings reductions have had. Small caps where earnings
forecasts were reduced by 2%-plus fell in price on average about 35% during the
year, while mid-caps with 2%-plus estimate reductions fell by about 25%.
Benefiting from mega-cap mania, large caps with 2% estimate reductions
experienced only about 2% price declines on average! Coupled with our belief
that the incidence of negative change in small company earnings was abnormally
high last year, this notable investor forgiveness for large cap earnings
problems seems historically very generous, as well as exposing them to adverse
change in future market psychology. Remember that when investor forgiveness for
large cap shortfalls turns to punishment, they are valued in the stratosphere
while small caps sell at thirty-year relative lows.
4
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
REPORT FROM MANAGEMENT -- CONTINUED
Quite apart from such efforts at diagnostics, we are optimistic that the Fund's
portfolio companies will generate superior business and profitability growth in
1999 and onward. It is these very appealing earnings prospects company by
company plus their undervalued stock prices, combined with the general positives
in the small company investment outlook, that makes your investment team
particularly optimistic on a several year go forward basis.
This brings our best wishes for a prosperous and healthy 1999 to you all.
Yours sincerely,
/s/ FORD B. DRAPER
Ford B. Draper, Jr., President
Kalmar Investment Advisers
January 19, 1999
KALMAR "GROWTH-WITH-VALUE" SMALL CAP FUND
GROWTH OF $10,000 VS. THE RUSSEL 2000 INDEX AND THE LIPPER SMALL CAP FUND INDEX
- ---------------------------------------
AVERAGE ANNUAL RETURNS
Since*
1 Year Inception
--------- ---------
Fund (7.66)% 19.06%
Russell 2000 (2.55)% 13.59%
Lipper
Small Cap (0.85)% 13.77%
- ---------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Kalmar Small Cap Russell 2000 Lipper Small Cap
4/11/97 10,000 10,000 10,000
12/31/97 14,635 12,786 12,602
12/31/98 13,514 12,460 12,495
* The Fund commenced operations on April 11, 1997.
PLEASE BEAR IN MIND THAT INVESTING IN SMALL COMPANIES' STOCKS CAN INVOLVE HIGHER
RISK AND VOLATILITY THAN THOSE OF LARGER COMPANIES. THE S&P 500 AND RUSSELL 2000
ARE UNMANAGED STOCK MARKET INDICES WITHOUT ANY ASSOCIATED EXPENSES AND THEIR
RETURNS ASSUME THE REINVESTMENT OF ALL DIVIDENDS. THE LIPPER SMALL CAP FUND
INDEX IS AN UNWEIGHTED INDEX OF MUTUAL FUND PERFORMANCE, WHICH CONSISTS OF THE
AVERAGE RETURN OF THE 30 LARGEST SMALL CAP FUNDS. ALSO, PAST PERFORMANCE IS NOT
NECESSARILY INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURNS AND PRINCIPAL
VALUES MAY FLUCTUATE, SO THAT, WHEN REDEEMED, SHARES MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
DISTRIBUTED BY PROVIDENT DISTRIBUTORS, INC.
5
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KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
MARKET
VALUE
SHARES (NOTE 2)
------- -----------
COMMON STOCK -- 90.8%
BASIC MATERIALS -- 3.4%
CHEMICALS - SPECIALTY -- 2.9%
Cuno, Inc.*(a) ............................ 162,300 $ 2,637,375
Spartech Corp. ............................ 192,900 4,243,800
-----------
6,881,175
-----------
PAPER & FOREST PRODUCTS -- 0.5%
Caraustar Industries, Inc.(a) ............. 42,600 1,216,762
-----------
TOTAL BASIC MATERIALS ................................... 8,097,937
-----------
CAPITAL GOODS -- 16.4%
ELECTRICAL EQUIPMENT -- 3.7%
American Precision Industries*(a) ......... 67,400 695,062
AMETEK, Inc.*(a) .......................... 128,500 2,867,156
Benchmark Electronics, Inc.*(a) ........... 92,850 3,400,631
C & D Technology, Inc.(a) ................. 67,200 1,848,000
-----------
8,810,849
-----------
MANUFACTURING - DIVERSE -- 6.9%
Applied Power, Inc. (A Shares)(a) ......... 187,225 7,067,744
Excel Technology, Inc.*(a) ................ 142,200 1,457,550
Furon Co.(a) .............................. 300,200 5,122,162
Penn Engineering & Manufacturing Corp.(a) . 128,500 2,875,187
-----------
16,522,643
-----------
MANUFACTURING - SPECIAL -- 4.3%
Brady (W.H.) Co. (a) ...................... 63,450 1,709,184
Flow International Corp.* ................. 52,700 510,531
Insituform Technologies (A Shares)*(a) .... 468,800 6,797,600
Paxar Corp.*(a) ........................... 125,100 1,118,081
-----------
10,135,396
-----------
OFFICE EQUIPMENT & SUPPLY -- 1.5%
National Computer Systems, Inc. ........... 94,400 3,492,800
-----------
TOTAL CAPITAL GOODS ..................................... 38,961,688
-----------
CONSUMER CYCLICALS -- 23.3%
BUILDING MATERIALS -- 0.2%
Shaw Group, Inc.*(a) ...................... 41,000 328,000
-----------
HARDWARE & TOOLS -- 0.2%
Acorn Products, Inc.*(a) .................. 60,900 426,300
-----------
HOUSEHOLD FURNITURE & APPAREL -- 3.3%
Aaron Rents, Inc.(a) ...................... 300,650 4,547,331
Watsco, Inc.(a) ........................... 200,850 3,364,237
-----------
7,911,568
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
DECEMBER 31, 1998
MARKET
VALUE
SHARES (NOTE 2)
------- -----------
RETAIL - APPAREL -- 0.5%
Stage Stores, Inc.*(a) .................... 118,900 $ 1,114,687
-----------
RETAIL - DISCOUNTERS -- 3.6%
Family Dollar Stores, Inc.(a) ............. 301,500 6,633,000
Insight Enterprises, Inc.*(a) ............. 37,850 1,925,619
-----------
8,558,619
-----------
RETAIL - SPECIALTY -- 7.3%
Casey's General Stores, Inc.(a) ........... 284,100 3,702,178
Department 56, Inc.* ...................... 74,500 2,798,406
Keystone Automotive Industries, Inc.*(a) .. 223,200 4,673,250
Party City Corp.*(a) ...................... 168,400 2,431,275
Shoe Pavilion, Inc.* ...................... 250,000 1,875,000
Sportsman's Guide, Inc.* .................. 300,000 1,912,500
-----------
17,392,609
-----------
SERVICES - COMMERCIAL & CONSUMER -- 7.8%
Choicepoint, Inc.* ........................ 68,300 4,405,350
Cort Business Services Corp.*(a) .......... 100,200 2,429,850
DeVRY, Inc.*(a) ........................... 149,300 4,572,312
Market Facts, Inc.* ....................... 57,700 1,500,200
Renters Choice, Inc.*(a) .................. 178,100 5,654,675
-----------
18,562,387
-----------
TEXTILES - HOME FURNISHINGS -- 0.4%
Interface, Inc.(a) ........................ 110,600 1,026,506
-----------
TOTAL CONSUMER CYCLICALS ................................ 55,320,676
-----------
CONSUMER STAPLES -- 8.9%
DISTRIBUTIONS - FOOD & HEALTH -- 2.9%
Performance Food Group Co.*(a) ............ 118,700 3,338,437
US Foodservice, Inc.*(a) .................. 56,800 2,783,200
Worthington Foods, Inc. ................... 43,700 830,300
-----------
6,951,937
-----------
HOUSEHOLD PRODUCTS -- 0.7%
Lesco, Inc.(a) ............................ 134,975 1,737,803
-----------
RESTAURANTS -- 4.3%
Consolidated Products, Inc.*(a) ........... 286,820 5,915,662
Logan's Roadhouse, Inc.* .................. 178,200 4,187,700
-----------
10,103,362
-----------
SPECIALTY PRINTING -- 1.0%
Cadmus Communications Corp.(a) ............ 122,500 2,312,187
-----------
TOTAL CONSUMER STAPLES .................................. 21,105,289
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
DECEMBER 31, 1998
MARKET
VALUE
SHARES (NOTE 2)
------- ----------
ENERGY -- 3.2%
OIL & GAS - DRILLING & EQUIPMENT -- 1.4%
J. Ray McDermott, S.A.*(a) .................. 58,630 $1,432,771
UNIFAB International, Inc.* ................. 109,200 873,600
Weatherford International* .................. 60,400 1,170,250
----------
3,476,621
----------
OIL & GAS - EXPLORATION & PRODUCTION -- 1.8%
Brigham Exploration Co.* .................... 72,300 397,650
Evergreen Resources, Inc.* .................. 114,500 2,032,375
Stone Energy Corp.* ......................... 61,400 1,765,250
----------
4,195,275
----------
TOTAL ENERGY ............................................. 7,671,896
----------
FINANCIAL -- 5.1%
CONSUMER FINANCE -- 3.9%
AmeriCredit Corp.*(a) ....................... 317,800 4,389,613
Doral Financial Corp.(a) .................... 223,200 4,938,300
----------
9,327,913
----------
INSURANCE - LIFE & HEALTH -- 0.7%
Penn Treaty American Corp.* ................. 59,575 1,604,802
----------
FINANCIAL - DIVERSE -- 0.5%
Federated Investors, Inc. ................... 65,000 1,178,125
----------
TOTAL FINANCIAL .......................................... 12,110,840
----------
HEALTHCARE -- 6.3%
HEALTHCARE - DIVERSE -- 0.7%
Sola International, Inc.*(a) ................ 100,000 1,725,000
----------
HEALTHCARE - DRUGS MAJOR -- 0.6%
Chirex, Inc.*(a) ............................ 62,400 1,333,800
----------
HEALTHCARE - MANAGED CARE -- 0.6%
Healthplan Services Corp.(a) ................ 64,600 742,900
PMR Corp.*(a) ............................... 97,700 744,963
----------
1,487,863
----------
HEALTHCARE - MEDICAL PRODUCTS &
SUPPLIES -- 2.1%
Dentsply International, Inc.(a) ............. 136,000 3,502,000
Steris Corp.* ............................... 51,300 1,458,844
----------
4,960,844
----------
HEALTHCARE - SPECIALIZED SERVICES -- 2.3%
Renal Care Group, Inc.*(a) .................. 72,750 2,096,109
Veterinary Centers of America, Inc.* ........ 172,900 3,447,194
----------
5,543,303
----------
TOTAL HEALTHCARE ......................................... 15,050,810
----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
8
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KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
DECEMBER 31, 1998
MARKET
VALUE
SHARES (NOTE 2)
------- -----------
TECHNOLOGY -- 23.4%
COMMUNICATIONS - EQUIPMENT -- 1.1%
Norstan, Inc.*(a) ......................... 79,800 $ 1,416,450
Tollgrade Communications, Inc.* ........... 56,000 1,078,000
-----------
2,494,450
-----------
COMPUTER SOFTWARE SERVICES -- 10.4%
American Management Systems, Inc.*(a) ..... 85,300 3,412,000
Caere Corp.*(a) ........................... 236,200 3,306,800
Clarify, Inc.*(a) ......................... 143,000 3,494,563
Computer Horizons Corp.*(a) ............... 126,696 3,373,281
Fair, Isaac & Co., Inc. ................... 3,500 161,656
Inter-Tel, Inc. ........................... 15,500 362,313
Landmark Systems Corp.* ................... 148,100 1,647,613
Micro Focus Group PLC, Sponsored ADR* ..... 28,325 267,317
Natural Microsystems Corp.*(a) ............ 84,800 617,450
Platinum Technology, Inc.*(a) ............. 104,000 1,989,000
SPSS, Inc.* ............................... 73,500 1,387,313
Systems & Computer Technology Corp.*(a) ... 344,610 4,738,388
-----------
24,757,694
-----------
ELECTRONIC - INSTRUMENTS -- 3.6%
Analogic Corp.(a) ......................... 134,300 5,053,038
Richardson Electronics, Ltd.(a) ........... 159,200 1,532,300
Veeco Instruments, Inc.* .................. 35,500 1,885,938
-----------
8,471,276
-----------
ELECTRONICS - DEFENSE -- 0.8%
Electromagnetic Sciences, Inc.*(a) ........ 142,500 1,995,000
-----------
ELECTRONICS - MISCELLANEOUS
COMPONENTS -- 3.3%
ATMI, Inc.* ............................... 75,900 1,916,475
Integrated Circuit Systems, Inc.*(a) ...... 59,000 1,039,875
Optek Technology, Inc.*(a) ................ 106,200 2,004,525
Rogers Corp.*(a) .......................... 95,700 2,859,038
-----------
7,819,913
-----------
SERVICES - ADVERTISING & MARKETING -- 2.5%
Acxiom Corp.* ............................. 163,760 5,076,560
Intelligroup, Inc.* ....................... 47,200 843,700
-----------
5,920,260
-----------
SERVICES - COMPUTER SYSTEMS -- 1.7%
Keane, Inc.*(a) ........................... 101,800 4,065,638
-----------
TOTAL TECHNOLOGY ........................................ 55,524,231
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
9
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KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
DECEMBER 31, 1998
MARKET
VALUE
SHARES (NOTE 2)
------- ------------
TRANSPORTATION -- 0.8%
AIR FREIGHT -- 0.5%
Airnet Systems, Inc.*(a)................... 80,900 $ 1,162,938
------------
TRUCKING -- 0.3%
Gulfmark Offshore, Inc.*(a)................ 39,500 622,125
------------
TOTAL TRANSPORTATION..................................... 1,785,063
------------
TOTAL COMMON STOCK
(Cost $186,433,526) ................................... 215,628,430
------------
MONEY MARKET FUNDS -- 9.3%
Samson Street Fund - Money Market
Portfolio ............................... 11,068,914 11,068,914
Temp Cash Fund - Dollar Series ............ 11,068,914 11,068,914
------------
TOTAL MONEY MARKET FUNDS (Cost $22,137,828) ............. 22,137,828
------------
TOTAL INVESTMENTS (Cost $208,571,354)(DAGGER)-- 100.1% ........... $237,766,258
OTHER ASSETS AND LIABILITIES, NET-- (0.1%) ...................... (226,621)
------------
NET ASSETS -- 100.0% ............................................. $237,539,637
============
* Non-income producing security.
(a) Denotes a portion of the shares of the security were acquired through a
transfer in-kind exchange (See Note 2 --Transfers in-kind).
(DAGGER) The cost for Federal income tax purposes was $192,339,382. At December
31, 1998, net unrealized appreciation was $45,426,876. This consisted
of aggregate gross unrealized appreciation for all securities for which
there was an excess of market value over tax cost of $58,465,460, and
aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over market value of $13,038,584.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at market value
(cost $208,571,354)................................................. $237,766,258
Receivables for:
Dividends and interest.............................................. 123,564
Capital shares sold................................................. 25,600
Other assets........................................................... 24,142
------------
Total Assets........................................................ 237,939,564
------------
LIABILITIES
Payables for:
Investment securities purchased..................................... 124,437
Due to Adviser......................................................... 191,822
Accrued expenses....................................................... 83,668
------------
Total Liabilities................................................... 399,927
------------
NET ASSETS............................................................. $237,539,637
============
NET ASSETS CONSISTED OF:
Shares of beneficial interest.......................................... $ 187,750
Additional paid in capital............................................. 209,907,944
Accumulated net realized loss on investments........................... (1,750,961)
Net unrealized appreciation on investments............................. 29,194,904
------------
NET ASSETS FOR 18,775,006 SHARES OUTSTANDING........................... $237,539,637
============
NET ASSET VALUE, OFFERING, AND REDEMPTION PRICE PER SHARE
($237,539,637/18,775,006 outstanding shares of beneficial interest,
$0.01 par value).................................................... $12.65
======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL
YEAR ENDED
DECEMBER 31, 1998
-----------------
INVESTMENT INCOME
Dividends ................................................. $ 1,057,229
Interest .................................................. 652,798
------------
Total Investment Income ................................ 1,710,027
------------
EXPENSES
Advisory fee .............................................. 2,394,274
Accounting fee ............................................ 264,428
Administration fee ........................................ 87,886
Transfer agent fee ........................................ 22,772
Custodian fee ............................................. 32,157
Audit ..................................................... 19,997
Legal ..................................................... 24,946
Shareholder Reports ....................................... 26,542
Registration fee .......................................... 57,264
Trustees' fees ............................................ 15,050
Amortization of organizational expense .................... 5,800
Miscellaneous ............................................. 12,144
------------
Total expenses ......................................... 2,963,260
NET INVESTMENT LOSS .......................................... (1,253,233)
------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investment transactions .............. (8,108,156)
Change in net unrealized depreciation on investments ...... (13,132,422)
------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS .............. (21,240,578)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ......... $(22,493,811)
============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FISCAL APRIL 11, 1997(DAGGER)
YEAR ENDED THROUGH
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------------
<S> <C> <C>
OPERATIONS
Net investment loss ........................................................... $ (1,253,233) $ (598,871)
Net realized gain (loss) on investment transactions ........................... (8,108,156) 8,860,431
Change in net unrealized appreciation (depreciation)
on investments ............................................................. (13,132,422) 42,327,326
------------- -------------
Net increase (decrease) in net assets resulting
from operations ......................................................... (22,493,811) 50,588,886
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments .............................................. -- (8,860,431)
Distribution in excess of net realized gain on investment ..................... -- (5,367,704)
------------- -------------
Total Distributions ........................................................ -- (14,228,135)
------------- -------------
SHARE TRANSACTIONS (a):
Receipt from shares sold ...................................................... 52,930,125 45,578,705
Receipt from securities transferred in-kind ................................... 12,088,879 136,516,678
Shares reinvested ............................................................. -- 12,948,955
Shares redeemed ............................................................... (31,692,013) (4,748,632)
------------- -------------
Net increase in net assets from Fund share transactions .................... 33,326,991 190,295,706
------------- -------------
TOTAL INCREASE IN NET ASSETS ..................................................... 10,833,180 226,656,457
NET ASSETS:
Beginning of period ........................................................... 226,706,457 50,000
------------- -------------
End of period ................................................................. $ 237,539,637 $ 226,706,457
============= =============
(a) TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST WERE:
Shares sold ................................................................... 3,922,701 3,696,217
Shares issued in exchange for securities transferred
in kind (Note 2) ........................................................... 851,608 12,234,389
Shares reinvested ............................................................. -- 957,763
Shares redeemed ............................................................... (2,552,941) (339,731)
------------- -------------
Net increase in shares ........................................................ 2,221,368 16,548,638
Shares outstanding - Beginning balance ........................................ 16,553,638 5,000
------------- -------------
Shares outstanding - Ending balance ........................................... 18,775,006 16,553,638
============= =============
<FN>
(DAGGER) Commencement of Operations.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FISCAL APRIL 11, 1997(DAGGER)
YEAR ENDED THROUGH
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------------
<S> <C> <C>
Net asset value at beginning of period........................ $13.70 $10.00
====== ======
INVESTMENT OPERATIONS
Net investment loss........................................... (0.07) (0.04)
Net realized and unrealized gain (loss) on investments........ (0.98) 4.66
------ ------
Total from investment operations........................ (1.05) 4.62
------ ------
DISTRIBUTIONS
From net realized gain on investments......................... -- (0.57)
In excess of net realized gain on investments................. -- (0.35)
------ ------
Total distributions..................................... -- (0.92)
------ ------
Net asset value at end of period.............................. $12.65 $13.70
====== ======
Total return.................................................. (7.66)% 46.35%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses(DOUBLE DAGGER).................................... 1.24% 1.25%*
Net investment loss........................................ (0.52)% (0.51)%*
Portfolio turnover rate....................................... 27.41% 34.39%
Net assets at end of period (000 omitted)..................... $237,540 $226,706
<FN>
* Annualized.
(DAGGER) Commencement of Operations.
(DOUBLE DAGGER) Rodney Square Management Corporation, the Fund's prior administrator and accounting
agent, waived a portion of its administration and accounting fees for the period ended
December 31, 1997. If these expenses had been incurred by the Fund, the annualized ratio
of expenses to average daily net assets for the period ended December 31, 1997 would have
been 1.32%.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE FUND. The Kalmar "Growth-With-Value" Small Cap Fund (the
"Fund") is the first series of Kalmar Pooled Investment Trust (the "Trust"), a
Delaware business trust organized on September 30, 1996. The Fund is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end diversified management investment company. The investment objective of
the Fund is long-term capital appreciation. The Fund commenced investment
operations on April 11, 1997.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the
significant accounting policies of the Fund.
SECURITY VALUATION. The Fund's securities, except short-term investments with
remaining maturities of 60 days or less, are valued at their market value as
determined by their last sale price in the principal market in which these
securities are normally traded. Lacking any sales, the security will be valued
at the mean between the closing bid and ask price. Short-term investments with
remaining maturities of 60 days or less are valued at amortized cost, which
approximates market value, unless the Trust's Board of Trustees determines that
this does not represent fair value. The value of all other securities is
determined in good faith under the direction of the Board of Trustees. There
were no such securities valued by the Board of Trustees on December 31, 1998.
FEDERAL INCOME TAXES. The Fund intends to continue to qualify for treatment as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code"), and to distribute all of its
taxable income to its shareholders. Therefore, no federal income tax provision
has been provided.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions of net investment income and net
realized gains will be made annually. Additional distributions may be made to
the extent necessary to avoid the payment of a 4% excise tax. The amounts of
dividends from net investment income and of distributions from net realized
gains are determined in accordance with Federal income tax regulations, which
may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the composition of net assets based on their Federal tax-basis treatment;
temporary differences do not require reclassification. At December 31, 1998 a
net investment loss of $1,253,233 and a $6,515,124 book realized capital loss
was reclassified into paid in capital. The $6,515,124 book realized capital loss
reclassified into paid in capital was due to a permanent difference between the
tax realized capital loss of $1,593,032 and book realized capital loss of
$8,108,156. This permanent difference was the result of securities being sold
that had a permanent book and tax cost basis difference, which was caused by
transfers in-kind (see "transfers in-kind"). The Fund has a capital loss
carryforward of $1,199,555, which expires on December 31, 2006, available to
offset future capital gains. Dividends and distributions to shareholders which
exceed net investment income and net realized gains for financial reporting
purposes but not for tax purposes are reported as dividends in excess of net
investment income or distributions in excess of net realized gains. To the
extent they exceed net investment income and net realized gains for tax
purposes, they are reported as distributions of capital.
DEFERRED ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization have been deferred and are being amortized using the straight-line
method over a five-year period beginning on the date that the Fund commenced
operations. In the event that any of the initial shares of the Fund are redeemed
during the amortization period by any holder thereof, the redemption proceeds
will be reduced by any unamortized organization expenses in the same proportion
as the number of initial shares being redeemed bears to the number of initial
shares outstanding at the time of such redemption.
15
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS. 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
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
TRANSFERS IN-KIND. During the fiscal year ended December 31, 1998, certain
shareholders transferred securities in exchange for Fund shares. These exchanges
were conducted on a taxable basis, whereby for both generally accepted
accounting principles and tax purposes the cost of the securities transferred
in-kind to the Fund is equal to the market value of such securities on their
respective dates of contribution to the Fund. Upon the Fund's commencement of
investment operations, a number of separately managed accounts managed by Kalmar
Investment Advisers, transferred appreciated securities in exchange for Fund
shares. These exchanges were conducted on a tax free basis, whereby for purposes
of generally accepted accounting principles, the book cost of any securities
transferred in-kind to the Fund is equal to the market value of such securities
on their respective dates of contribution to the Fund. For tax purposes, the
cost of those securities transferred in-kind to the Fund is equal to the
historical cost of those securities to the contributing party. The result is a
permanent difference between book cost and tax cost to the Fund. This permanent
book/tax difference will cause a difference in book realized capital gains and
losses and tax realized capital gains and losses. These differences will be
reclassified into paid in capital.
OTHER. Investment security transactions are accounted for on a trade date basis.
The Fund uses the specific identification method for determining realized gain
or loss on investments for both financial and Federal income tax reporting
purposes. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on an accrual basis.
3. PURCHASES AND SALES OF INVESTMENT SECURITIES. During the fiscal year ended
December 31, 1998, purchases and sales of investment securities (excluding
short-term investments) aggregated as follows:
Purchases .................................. $97,465,284*
Sales ...................................... 59,821,130
* Includes securities transferred in-kind of $12,088,879
4. INVESTMENT ADVISORY FEE AND OTHER SERVICES. The Fund employs Kalmar
Investment Advisers as its investment adviser (the "Adviser"). Pursuant to an
Investment Advisory agreement with the Trust, on behalf of the Fund, the Adviser
selects investments and supervises the assets of the Fund in accordance with the
investment objective, policies and restrictions of the Fund, subject to the
supervision and direction of the officers and Board of Trustees of the Trust.
For its services, the Adviser is paid a monthly fee at the annual rate of 1.00%
of the Fund's average daily net assets. For the fiscal year ended December 31,
1998, the Fund incurred Advisory fees of $2,394,274.
Effective January 5, 1998, PFPC Inc. ("PFPC"), an indirect wholly-owned
subsidiary of PNC Bank Corp., a multi-bank holding company, serves as
administrator to the Fund. As Administrator, PFPC is responsible for services
such as budgeting, maintaining federal registration of the Fund's shares,
financial reporting, compliance monitoring and corporate management. Prior to
January 5, 1998, Rodney Square Management Corporation ("RSMC"), a wholly-owned
subsidiary of Wilmington Trust Company ("WTC"), which is wholly-owned by
Wilmington Trust Corporation, a publicly held bank holding company, served as
Administrator to the Fund pursuant to an Administration Agreement with the Trust
on behalf of the Fund. For the services provided, the Fund pays a monthly
administration fee at an annual rate based upon the average daily net assets of
the Fund of 0.15% of average daily net assets up to $50 million and 0.10% of
average daily net assets over $50 million. The administration fee earned by RSMC
for the period January 1,
16
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
1998 through January 4, 1998, amounted to $2,677 and the fee earned by PFPC for
the period January 5, 1998, through December 31, 1998 amounted to $261,751.
Effective January 5, 1998, PFPC determines the net asset value per share of the
Fund and provides accounting services to the Fund pursuant to an Accounting
Services Agreement with the Trust. Prior to January 5, 1998, RSMC provided these
services. The Fund pays an annual fee of $45,000, plus an amount based on the
average daily net assets of the Fund as follows: 0.03% of average daily net
assets over $50 million up to $100 million and 0.02% of average daily net assets
over $100 million. The accounting services fee earned by RSMC for the period
January 1, 1998 through January 4, 1998 amounted to $919 and the fee earned by
PFPC for the period January 5, 1998, through December 31, 1998 amounted to
$86,967.
Effective January 5, 1998, PFPC serves as transfer agent and dividend disbursing
agent of the Fund pursuant to a Transfer Agency Agreement with the Trust on
behalf of the Fund. Prior to January 5, 1998, RSMC provided these services.
Effective January 5, 1998, PNC Bank, N.A. serves as Custodian of the assets of
the Fund pursuant to a Custody Agreement with the Trust. Prior to January 5,
1998, WTC provided these services.
Certain Trustees and officers of the Trust are also officers of the Adviser.
Such Trustees and officers are not paid any fees by the Trust for serving as
Trustees or officers of the Trust.
17
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
===================
"GROWTH-WITH-VALUE"
SMALL CAP FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF KALMAR "GROWTH-WITH-VALUE" SMALL CAP FUND:
In our opinion the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations, changes
in net assets, and the financial highlights present fairly, in all material
respects, the financial position of Kalmar "Growth-With-Value" Small Cap Fund, a
series of Kalmar Pooled Investment Trust (The "Fund") at December 31, 1998, and
the results of its operations for the year then ended, changes in its net assets
and financial highlights for each of the periods presented in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities owned at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, PA 19103
January 22, 1999
18
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
INVESTMENT ADVISER
KALMAR INVESTMENT ADVISERS
BARLEY MILL HOUSE
3701 KENNETT PIKE
WILMINGTON, DE 19807
UNDERWRITER
PROVIDENT DISTRIBUTORS, INC.
FOUR FALLS CORPORATE CENTER, 6TH FLOOR
WEST CONSHOHOCKEN, PA 19428-2961
SHAREHOLDER SERVICES
PFPC INC.
400 BELLEVUE PARKWAY
WILMINGTON, DE 19809
CUSTODIAN
PNC BANK, N.A.
1600 MARKET STREET
PHILADELPHIA, PA 19103
LEGAL COUNSEL
PEPPER HAMILTON LLP
3000 TWO LOGAN SQUARE
18TH & ARCH STREETS
PHILADELPHIA, PA 19103-2799
AUDITORS
PRICEWATERHOUSECOOPERS LLP
2400 ELEVEN PENN CENTER
PHILADELPHIA, PA 19103
<PAGE>
KALMAR POOLED INVESTMENT TRUST
BARLEY MILL HOUSE
3701 KENNETT PIKE
WILMINGTON, DE 19807
(PHONE) 302-658-7575
(FAX) 302-658-7513
KL06 - 12/98
