--------------------------------------------------------------------------------
ANNUAL REPORT
MAY 31, 2000
--------------------------------------------------------------------------------
ATALANTA/SOSNOFF INVESTMENT TRUST
101 Park Avenue o New York, NY 10178
toll free 1-877-SOSNOFF (767-6633)
website o www.atalantasosnoff.com
e-mail o [email protected]
BOARD OF TRUSTEES
Howard A. Drucker
Anthony G. Miller
Toni E. Sosnoff [LOGO]
Irving L. Straus
Aida L. Wilder
INVESTMENT ADVISER
Atalanta/Sosnoff Capital Corp. (Delaware)
101 Park Avenue o New York, NY 10178
DISTRIBUTOR
Atalanta/Sosnoff Management Corporation
101 Park Avenue o New York, NY 10178
TRANSFER AGENT
Integrated Fund Services, Inc. ATALANTA/SOSNOFF FUND
P.O. Box 5354 o Cincinnati, OH 45201-5354 ATALANTA/SOSNOFF FOCUS FUND
ATALANTA/SOSNOFF VALUE FUND
ATALANTA/SOSNOFF BALANCED FUND
--------------------------------------------------------------------------------
[LOGO]
--------------------------------------------------------------------------------
<PAGE>
LETTER TO SHAREHOLDERS JULY 25, 2000
================================================================================
Dear Shareholder:
For the year ended May 31, 2000, the Atalanta/Sosnoff Fund returned 20.99%
compared with the S&P 500 Index return of 10.49%. For the year ended June 30,
2000, the Atalanta/Sosnoff Fund returned 22.76% compared with 7.26% for the S&P
500 Index.
The Atalanta/Sosnoff Focus Fund returned 21.60% for the period July 1, 1999
(date of inception) to May 31, 2000 compared with the S&P 500 Index return of
4.68%. For the year ended June 30, 2000, Atalanta/Sosnoff Focus Fund returned
27.70% compared with the S&P 500 Index return of 7.26%.
The Atalanta/Sosnoff Value Fund returned 6.80% for the period July 1, 1999 (date
of inception) to May 31, 2000 compared with the S&P 500 Index return of 4.68%.
For the year ended June 30, 2000, Atalanta/Sosnoff Value Fund returned 6.80% and
the S&P 500 Index returned of 7.26%.
The Atalanta/Sosnoff Balanced Fund returned 12.98% for the period July 1, 1999
(date of inception) to May 31, 2000 compared with 2.40% for the Lehman Brothers
Intermediate Government/Credit Bond Index and 4.68% for the S&P 500 Index. For
the year ended June 30, 2000, the Atalanta/Sosnoff Balanced Fund returned 16.50%
compared with 4.21% for the Lehman Brothers Intermediate Government/Credit Bond
Index and 7.26% for the S&P 500 Index.
o o o
The economy seems headed for a soft landing. Federal Reserve Board tightening is
beginning to impact the consumer sector and could lead to a deceleration of
capital spending which has been on a roll over the past five years. The latest
reading on auto sales shows some easing as do retail sales, particularly soft
goods. Housing starts have weakened with conventional mortgage rates over 8.6
percent.
Securities markets participants so far cannot make up their minds on the
economy. The bond crowd, as witnessed by the decline in yields for 10-year
Treasuries, is more focused on a hard landing. The equity players are voting for
a soft landing as seen by the recent weeks' action for major sector groups.
NASDAQ tech stocks have rebounded about 20 percent off their recent lows while
drug stocks, and benchmark non-durables like Coca-Cola and Proctor & Gamble,
have softened.
Reading the weekly and monthly entrails of economic statistics and drawing
definitive conclusions is always dangerous but there is sufficient evidence to
conclude that the economic pace of recent quarters, over 5 percent GDP momentum,
is over. To suggest a recession is around the corner is a huge extrapolation
unless the stock market corrects at least 20 percent (not our call).
The investment wealth in the country built up over the past five years is
enormous. Add in a full employment economy, tame inflation, low capacity
utilization for industry, high rates of return on equity for the S&P 500 stocks
and a strong dollar, and our conclusion is that most macro-economic forces are
benevolent for the country, the economy and securities markets. Even the
Presidential candidates are close to each other with conservative stands on tax
reduction, utilization of the budget surplus and free trade policy.
2
<PAGE>
LETTER TO SHAREHOLDERS (CONTINUED)
================================================================================
We no longer expect the Federal Reserve Board will feel the need to continue its
policy of gradual tightening throughout this year. The yield curve will remain
inverted but won't be forecasting the next recession. We have begun to lengthen
bond portfolio duration for balanced and fixed income accounts, adding Ginnie
Mae securities yielding 170 points over 10-year Treasuries.
Our working hypothesis of a soft landing has meaning for equity sector
weightings. We have reduced holdings in the retail sector and have stopped the
selling down of tech stocks, now about 28 percent of equity holdings, compared
with over 30 percent for the index. We have completed our rotation into health
care, insurance, oil service and non-durables, and expect these actions to have
value added over ensuing quarters. With few exceptions, we have reduced stocks
with excessive valuations. We expect the health care sector and the financials
to reassert their leadership later in the year as the expectation of a slowing
economy gains credibility. If oil quotes hold at $25 a barrel or better, the
drillers should gain followers and are early in their recovery cycle. Software
positions like Microsoft and Computer Associates hurt performance and this
exposure is minimal at present.
The market, after its moderate but concentrated correction early in April and
late in May, still stands at 24 times our projection of S&P earnings 12-months
forward. Keep in mind the median multiple for the S&P Index is mid-teens.
Greenspan should think about this, too. The public needs to rein in its
expectations on future stock market returns. Volatility on a daily basis is
rising and the market is unforgiving of corporate earnings shortfalls.
We are committed to delivering good long-term results to you by continuing to
invest in those companies where we believe earnings are accelerating over a long
cycle. Corning Glass is a good example, where we have recently added to an
established portfolio position of some concentration.
With all good wishes,
Martin T. Sosnoff
3
<PAGE>
ATALANTA/SOSNOFF INVESTMENT TRUST
PERFORMANCE
================================================================================
There are several ways to evaluate historical performance. You can look at the
total percentage change in value, the average annual percentage change or the
growth of a hypothetical $10,000 investment. Total return reflects the change in
value of an investment, assuming reinvestment of the of the fund's dividend
income and capital gains (the profits earned upon the sale of securities that
have grown in value).
Cumulative total returns show the fund's performance in percentage terms over a
set period (one year or since inception). For example, if you had invested
$1,000 in a fund that had a 5% return over the past year, the value of your
investment would be $1,050. You can compare the fund's returns to the
performance of the Standard and Poor's 500 Index -- a market
capitalization-weighted index of common stocks. To measure how the fund's
performance stacked up against its peers, you can compare it to the Lipper
Large-Cap Core Index, which reflects the performance of mutual funds with
similar objectives tracked by Lipper Inc.
Average annual returns take the fund's cumulative return and show you what would
have happened if the fund had performed at a constant rate each year.
$10,000 Over the Life of the Fund allows you to track a hypothetical investment
over a period of time to reflect the growth of the investment. The value of the
$10,000 investment can be compared to the Standard and Poor's 500 Index return
over a comparable period of time.
Understanding Performance -- How a fund did yesterday is no guarantee of how it
will do tomorrow. The stock market, for example, has a history of long-term
growth and short-term volatility. In turn, the share price and return of a fund
that invests in stocks will vary. That means if you sell your shares during a
market downturn, you might lose money. But if you can ride out the market's ups
and downs, you may have a gain.
4
<PAGE>
ATALANTA/SOSNOFF INVESTMENT TRUST
PERFORMANCE (CONTINUED)
================================================================================
Comparison of the Change in Value of a $10,000 Investment
in the Atalanta/Sosnoff Fund and the S&P 500 Index
[GRAPHIC OMITTED]
5/31/00
-------
Atalanta/Sosnoff Fund $14,930
S&P 500 Index $13,401
------------------------------
Atalanta/Sosnoff Fund
Average Annual Total Return
Since Inception* 22.70%
1 Year 20.99%
------------------------------
Past performance is not predictive of future performance.
*Initial public offering of shares was June 17, 1998.
Comparison of the Change in Value of a $10,000 Investment
in the Atalanta/Sosnoff Focus Fund and the S&P 500 Index
[GRAPHIC OMITTED]
5/31/00
-------
Atalanta/Sosnoff Focus Fund $12,160
S&P 500 Index $10,468
------------------------------
Atalanta/Sosnoff Focus Fund
Total Return
Since Inception* 21.60%
------------------------------
Past performance is not predictive of future performance.
*Initial public offering of shares was July 1, 1999.
5
<PAGE>
ATALANTA/SOSNOFF INVESTMENT TRUST
PERFORMANCE (CONTINUED)
================================================================================
Comparison of the Change in Value of a $10,000 Investment
in the Atalanta/Sosnoff Value Fund and the S&P 500 Index
[GRAPHIC OMITTED]
5/31/00
-------
Atalanta/Sosnoff Value Fund $10,680
S&P 500 Index $10,468
------------------------------
Atalanta/Sosnoff Value Fund
Total Return
Since Inception* 6.80%
------------------------------
Past performance is not predictive of future performance.
*Initial public offering of shares was July 1, 1999.
Comparison of the Change in Value of a $10,000 Investment in the
Atalanta/Sosnoff Balanced Fund, Lehman Brothers Intermediate Government/Credit
Bond Index, S&P 500 Index and 65% S&P 500 Index/35% Lehman Brothers
Intermediate Government/Credit Bond Index
[GRAPHIC OMITTED]
5/31/00
-------
Atalanta/Sosnoff Balanced Fund $11,298
Lehman Brothers Intermediate
Government/Credit Bond Index $10,240
S&P 500 Index $10,468
65% S&P Index/35% Lehman Brothers
Intermediate Government/Credit Bond Index $10,412
------------------------------
Atalanta/Sosnoff Balanced Fund
Total Return
Since Inception* 12.98%
------------------------------
Past performance is not predictive of future performance.
*Initial public offering of shares was July 1, 1999.
6
<PAGE>
ATALANTA/SOSNOFF FUND
PORTFOLIO CHARACTERISTICS (UNAUDITED)
================================================================================
SECTOR CONCENTRATION VS. THE S&P 500 INDEX (AS OF MAY 31, 2000)
[GRAPHIC OMITTED]
TOP TEN HOLDINGS (AS OF MAY 31, 2000)
% OF
STOCK SECTOR PORTFOLIO
----------------------------------------------------------
R&B Falcon Energy 4.1%
American Home Products Health Care 4.1%
Wellpoint Health Networks Health Care 3.6%
XL Capital Limited Financial 3.6%
Merck Health Care 3.6%
Intel Technology 3.4%
IBM Technology 3.2%
AT&T Corporation -
Liberty Media Group - Class A Consumer Staples 3.1%
Ace Limited Financial 3.0%
Johnson & Johnson Health Care 2.8%
-----
TOTAL: 34.5%
COMPARATIVE PERFORMANCE
<TABLE>
<CAPTION>
TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
--------------- ---------------------------------
SINCE INCEPTION* YEAR ENDED SINCE INCEPTION*
TO MAY 31, 2000 JUNE 30, 2000 TO JUNE 30, 2000
--------------- ------------- ----------------
<S> <C> <C> <C>
Atalanta/Sosnoff Fund 49.3% 22.8% 23.9%
Morningstar Large Cap Blend Category n/a 8.9% n/a
Lipper Large-Cap Core Index 32.5% 11.5% 16.8%
S&P 500 Index 34.0% 7.3% 16.8%
</TABLE>
* Inception (June 17, 1998)
7
<PAGE>
ATALANTA/SOSNOFF FOCUS FUND
PORTFOLIO CHARACTERISTICS (UNAUDITED)
================================================================================
SECTOR CONCENTRATION VS. THE S&P 500 INDEX (AS OF MAY 31, 2000)
[GRAPHIC OMITTED]
TOP TEN HOLDINGS (AS OF MAY 31, 2000)
% OF
STOCK SECTOR PORTFOLIO
----------------------------------------------------------
Wellpoint Health Networks Health Care 6.5%
Merck Health Care 5.5%
Intel Technology 5.3%
American Home Products Health Care 5.2%
R&B Falcon Energy 4.3%
XL Capital Limited Financial 4.1%
Ace Limited Financial 4.1%
Motorola Technology 4.0%
Computer Associates
International Technology 3.2%
Johnson & Johnson Health Care 3.1%
-----
TOTAL: 45.3%
COMPARATIVE PERFORMANCE
TOTAL RETURNS TOTAL RETURNS
--------------- ---------------
SINCE INCEPTION* SINCE INCEPTION*
TO MAY 31, 2000 TO JUNE 30, 2000
--------------- ---------------
Atalanta/Sosnoff Focus Fund 21.6% 27.7%
Lipper Large-Cap Core Index 7.6% 11.5%
S&P 500 Index 4.7% 7.3%
* Inception (July 1, 1999)
8
<PAGE>
ATALANTA/SOSNOFF VALUE FUND
PORTFOLIO CHARACTERISTICS (UNAUDITED)
================================================================================
SECTOR CONCENTRATION VS. THE S&P 500 INDEX (AS OF MAY 31, 2000)
[GRAPHIC OMITTED]
TOP TEN HOLDINGS (AS OF MAY 31, 2000)
% OF
STOCK SECTOR PORTFOLIO
----------------------------------------------------------
Global Marine Energy 7.9%
R&B Falcon Energy 7.7%
XL Capital Limited Financial 7.2%
Ace Limited Financial 6.9%
Quanta Services Consumer Cyclicals 6.9%
El Paso Energy Utilities 6.5%
Nortel Networks Technology 5.1%
Transocean Sedco Forex Energy 4.6%
Rowan Energy 4.3%
Aon Financial 4.3%
-----
TOTAL: 61.4%
COMPARATIVE PERFORMANCE
TOTAL RETURNS TOTAL RETURNS
--------------- ---------------
SINCE INCEPTION* SINCE INCEPTION*
TO MAY 31, 2000 TO JUNE 30, 2000
--------------- ---------------
Atalanta/Sosnoff Value Fund 6.8% 6.8%
Lipper Large-Cap Value Index 7.6% 11.5%
S&P 500 Index 4.7% 7.3%
* Inception (July 1, 1999)
9
<PAGE>
ATALANTA/SOSNOFF BALANCED FUND
PORTFOLIO CHARACTERISTICS (UNAUDITED)
================================================================================
SECTOR CONCENTRATION VS. THE S&P 500 INDEX (AS OF MAY 31, 2000)
[GRAPHIC OMITTED]
TOP TEN HOLDINGS (AS OF MAY 31, 2000)
% OF
STOCK SECTOR PORTFOLIO
----------------------------------------------------------
Wellpoint Health Networks Health Care 3.9%
American Home Products Health Care 3.1%
Ace Limited Financial 3.0%
Johnson & Johnson Health Care 3.0%
Lowe's Consumer Cyclicals 2.9%
R&B Falcon Energy 2.8%
Bristol-Myers Squibb Health Care 2.8%
Motorola Technology 2.7%
XL Capital Limited Financial 2.7%
IBM Technology 2.7%
-----
TOTAL: 29.6%
COMPARATIVE PERFORMANCE
TOTAL RETURNS TOTAL RETURNS
--------------- ---------------
SINCE INCEPTION* SINCE INCEPTION*
TO MAY 31, 2000 TO JUNE 30, 2000
--------------- ---------------
Atalanta/Sosnoff Balanced Fund 13.0% 16.5%
Lehman Brothers Intermediate
Government/Credit Bond Index 2.4% 4.2%
S&P 500 Index 4.7% 7.3%
65/35 Composite Blend 4.1% 6.4%
* Inception (July 1, 1999)
10
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 2000
=====================================================================================================================
ATALANTA/SOSNOFF ATALANTA/SOSNOFF ATALANTA/SOSNOFF ATALANTA/SOSNOFF
FUND FOCUS FUND VALUE FUND BALANCED FUND
---------------------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
<S> <C> <C> <C> <C>
At acquisition cost .................... $ 17,561,660 $ 2,518,581 $ 1,865,168 $ 2,369,407
============ ============ ============ ============
At market value (Note 1) ............... $ 18,910,216 $ 2,584,994 $ 2,143,173 $ 2,402,086
Interest receivable ...................... 5,929 235 530 1,105
Dividends receivable ..................... 15,619 2,665 2,988 1,553
Receivable for securities sold ........... -- 48,337 320,785 --
Receivable from Adviser (Note 3) ......... -- 22,180 27,508 23,386
Organization costs, net (Note 1) ......... 34,584 -- -- --
Other assets ............................. 2,916 1,503 1,503 1,503
------------ ------------ ------------ ------------
TOTAL ASSETS ........................... 18,969,264 2,659,914 2,496,487 2,429,633
------------ ------------ ------------ ------------
LIABILITIES
Bank overdraft ........................... -- 1,754 -- --
Payable for securities purchased ......... 460,721 53,455 352,546 60,531
Payable to affiliates (Note 3) ........... 17,508 4,500 4,500 4,500
Other accrued expenses and liabilities ... 5,629 2,168 2,628 2,180
------------ ------------ ------------ ------------
TOTAL LIABILITIES ...................... 483,858 61,877 359,674 67,211
------------ ------------ ------------ ------------
NET ASSETS ............................... $ 18,485,406 $ 2,598,037 $ 2,136,813 $ 2,362,422
============ ============ ============ ============
Net assets consist of:
Paid-in capital .......................... $ 13,637,717 $ 2,153,145 $ 1,994,728 $ 2,100,143
Undistributed net investment income ...... -- -- -- 1,525
Accumulated net realized gains (losses)
from security transactions ............. 3,499,133 378,479 (135,920) 228,075
Net unrealized appreciation on
investments ............................ 1,348,556 66,413 278,005 32,679
------------ ------------ ------------ ------------
Net assets ............................... $ 18,485,406 $ 2,598,037 $ 2,136,813 $ 2,362,422
============ ============ ============ ============
Shares of beneficial interest
outstanding (unlimited number of
shares authorized, no par value) ....... 1,237,772 213,697 200,000 209,628
============ ============ ============ ============
Net asset value, offering price and
redemption price per share
(Note 1) ............................... $ 14.93 $ 12.16 $ 10.68 $ 11.27
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
=========================================================================================================================
ATALANTA/SOSNOFF ATALANTA/SOSNOFF ATALANTA/SOSNOFF ATALANTA/SOSNOFF
FUND FOCUS FUND VALUE FUND BALANCED FUND
-------------------------------------------------------------------------------------------------------------------------
YEAR PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31,
2000 2000(A) 2000(A) 2000(A)
-------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C> <C> <C> <C>
Interest ................................ $ 40,425 $ 8,140 $ 7,023 $ 33,340
Dividends ............................... 60,760 7,849 12,974 5,286
------------ ------------ ------------ ------------
TOTAL INVESTMENT INCOME .................... 101,185 15,989 19,997 38,626
------------ ------------ ------------ ------------
EXPENSES
Investment advisory fees (Note 3) ....... 122,517 16,649 13,419 15,837
Service plan expense (Note 3) ........... 40,815 5,560 4,481 5,288
Accounting services fees (Note 3) ....... 24,000 22,000 22,000 22,000
Administration fees (Note 3) ............ 24,908 11,000 11,000 11,000
Transfer agent fees (Note 3) ............ 18,000 16,500 16,500 16,500
Trustees' fees and expenses ............. 11,945 5,008 5,008 5,008
Custodian fees .......................... 11,544 3,838 4,940 3,781
Registration fees ....................... 8,668 4,985 4,945 4,970
Printing of shareholder reports ......... 15,046 2,296 2,099 2,141
Professional fees ....................... 8,973 2,071 2,071 2,071
Organization expense (Note 1) ........... 11,528 -- -- --
Insurance expense ....................... 9,145 -- -- --
Postage and supplies .................... 5,451 756 736 720
Other expenses .......................... 5,050 718 655 713
------------ ------------ ------------ ------------
TOTAL EXPENSES ....................... 317,590 91,381 87,854 90,029
Fees waived and expenses reimbursed by
the Adviser (Note 3) ................. (72,558) (58,083) (61,016) (58,355)
------------ ------------ ------------ ------------
NET EXPENSES ......................... 245,032 33,298 26,838 31,674
------------ ------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ............... (143,847) (17,309) (6,841) 6,952
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gains (losses)
from security transactions ........... 4,043,536 395,788 (135,920) 228,075
Net change in unrealized appreciation/
depreciation on investments .......... (976,693) 66,413 278,005 32,679
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAINS ON INVESTMENTS ..................... 3,066,843 462,201 142,085 260,754
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS .......................... $ 2,922,996 $ 444,892 $ 135,244 $ 267,706
============ ============ ============ ============
</TABLE>
(a) Represents the period from the initial public offering of shares (July 1,
1999) through May 31, 2000.
See accompanying notes to financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
=====================================================================================================
Atalanta/
Sosnoff
Atalanta/Sosnoff Fund Focus Fund
------------------------------- ------------
Year Period Period
Ended Ended Ended
May 31, May 31, May 31,
2000 2000(a) 2000(a)
-----------------------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C> <C>
Net investment loss ...................... $ (143,847) $ (59,472) $ (17,309)
Net realized gains (losses) from
security transactions ................. 4,043,536 (412,084) 395,788
Net change in unrealized appreciation
/depreciation on investments .......... (976,693) 2,325,249 66,413
------------ ------------ ------------
Net increase in net assets from operations .. 2,922,996 1,853,693 444,892
------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ................. 2,762,820 11,915,638 2,178,145
Payments for shares redeemed .............. (680,380) (389,361) (25,000)
------------ ------------ ------------
Net increase in net assets from capital
share transactions ....................... 2,082,440 11,526,277 2,153,145
------------ ------------ ------------
TOTAL INCREASE IN NET ASSETS ................ 5,005,436 13,379,970 2,598,037
NET ASSETS:
Beginning of period (Note 1) ............. 13,479,970 100,000 --
------------ ------------ ------------
End of period ............................ $ 18,485,406 $ 13,479,970 $ 2,598,037
------------ ------------ ------------
CAPITAL SHARE ACTIVITY:
Shares sold .............................. 197,725 1,120,933 215,686
Shares redeemed .......................... (52,407) (38,479) (1,989)
------------ ------------ ------------
Net increase in shares outstanding ....... 145,318 1,082,454 213,697
Shares outstanding, beginning of
period (Note 1) ....................... 1,092,454 10,000 --
------------ ------------ ------------
Shares outstanding, end of period ........ 1,237,772 1,092,454 213,697
------------ ------------ ------------
</TABLE>
(a) Represents the period from the initial public offering of shares (June 17,
1998) through May 31, 1999.
(b) Represents the period from the initial public offering of shares (July 1,
1999) through May 31, 2000.
See accompanying notes to financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED MAY 31, 2000(A)
=============================================================================================
ATALANTA/SOSNOFF ATALANTA/SOSNOFF
VALUE FUND BALANCED FUND
---------------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C>
Net investment income (loss) ...................... $ (6,841) $ 6,952
Net realized gains (losses) from security
transactions on investments .................... (135,920) 228,075
Net change in unrealized appreciation/
depreciation on investments .................... 278,005 32,679
------------ ------------
Net increase in net assets from operations ........... 135,244 267,706
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ........................ -- (5,427)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ......................... 2,020,000 2,104,716
Net asset value of share issued in reinvestment
of distributions to shareholders ............... -- 5,427
Payments for shares redeemed ...................... (18,431) (10,000)
------------ ------------
Net increase in net assets from capital share
transactions ...................................... 2,001,569 2,100,143
------------ ------------
TOTAL INCREASE IN NET ASSETS ......................... 2,136,813 2,362,422
NET ASSETS:
Beginning of period (Note 1) ...................... -- --
------------ ------------
End of period ..................................... $ 2,136,813 $ 2,362,422
============ ============
CAPITAL SHARE ACTIVITY:
Shares sold ....................................... 201,961 209,934
Shares reinvested ................................. -- 509
Shares redeemed ................................... (1,961) (815)
------------ ------------
Net increase in shares outstanding ................ 200,000 209,628
Shares outstanding, beginning of period (Note 1) .. -- --
------------ ------------
Shares outstanding, end of period ................. 200,000 209,628
============ ============
</TABLE>
(a) Represents the period from the initial public offering of shares (July 1,
1999) through May 31, 2000.
See accompanying notes to financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
ATALANTA/SOSNOFF FUND
FINANCIAL HIGHLIGHTS
========================================================================================
YEAR PERIOD
ENDED ENDED
MAY 31, MAY 31,
2000 1999(a)
----------------------------------------------------------------------------------------
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<S> <C> <C>
Net asset value at beginning of period ............... $ 12.34 $ 10.00
---------- ----------
Income from investment operations:
Net investment loss ............................... (0.12) (0.05)
Net realized and unrealized gains on investments .. 2.71 2.39
---------- ----------
Total from investment operations ..................... 2.59 2.34
---------- ----------
Net asset value at end of period ..................... $ 14.93 $ 12.34
========== ==========
Total return ......................................... 20.99% 23.40%(b)
========== ==========
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) .................. $ 18,485 $ 13,480
========== ==========
Ratio of net expenses to average net assets(c) ....... 1.50% 1.50%(d)
Ratio of net investment loss to average net assets ... (0.88%) (0.60%)(d)
Portfolio turnover rate .............................. 143% 124%(d)
</TABLE>
(a) Represents the period from the initial public offering of shares (June 17,
1998) through May 31, 1999.
(b) Not annualized.
(c) Absent fee waivers and expense reimbursements by the Adviser, the ratio of
expenses to average net assets would have been 1.95% and 2.54%(d) for the
periods ended May 31, 2000 and 1999, respectively (Note 3).
(d) Annualized.
15
<PAGE>
ATALANTA/SOSNOFF FOCUS FUND
FINANCIAL HIGHLIGHTS
================================================================================
Period
Ended
May 31,
2000(a)
--------------------------------------------------------------------------------
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:
Net asset value at beginning of period ....................... $ 10.00
----------
Income from investment operations:
Net investment loss ........................................ (0.08)
Net realized and unrealized gains on investments ........... 2.24
----------
Total from investment operations ............................. 2.16
----------
Net asset value at end of period ............................. $ 12.16
==========
Total return(b) .............................................. 21.60%
==========
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) .......................... $ 2,598
==========
Ratio of net expenses to average net assets(c)(d) ............ 1.50%
Ratio of net investment loss to average net assets(d) ........ (0.78%)
Portfolio turnover rate(d) ................................... 188%
(a) Represents the period from the initial public offering of shares (July 1,
1999) through May 31, 2000.
(b) Not annualized.
(c) Absent fee waivers and expense reimbursements by the Adviser, the ratio of
expenses to average net assets would have been 4.08%(d) for the period
ended May 31, 2000 (Note 3).
(d) Annualized.
See accompanying notes to financial statements.
16
<PAGE>
ATALANTA/SOSNOFF VALUE FUND
FINANCIAL HIGHLIGHTS
================================================================================
Period
Ended
May 31,
2000(a)
--------------------------------------------------------------------------------
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:
Net asset value at beginning of period ....................... $ 10.00
----------
Income from investment operations:
Net investment loss ........................................ (0.03)
Net realized and unrealized losses on investments .......... 0.71
----------
Total from investment operations ............................. 0.68
----------
Net asset value at end of period ............................. $ 10.68
==========
Total return(b) .............................................. 6.80%
==========
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) .......................... $ 2,137
==========
Ratio of net expenses to average net assets(c)(d) ............ 1.50%
Ratio of net investment loss to average net assets(d) ........ (0.38%)
Portfolio turnover rate(d) ................................... 416%
(a) Represents the period from the initial public offering of shares (July 1,
1999) through May 31, 2000.
(b) Not annualized.
(c) Absent fee waivers and expense reimbursements by the Adviser, the ratio of
expenses to average net assets would have been 4.87%(d) for the period
ended May 31, 2000 (Note 3).
(d) Annualized.
See accompanying notes to financial statements.
17
<PAGE>
ATALANTA/SOSNOFF BALANCED FUND
FINANCIAL HIGHLIGHTS
================================================================================
Period
Ended
May 31,
2000(a)
--------------------------------------------------------------------------------
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:
Net asset value at beginning of period ....................... $ 10.00
----------
Income from investment operations:
Net investment income ...................................... 0.03
Net realized and unrealized gains on investments ........... 1.27
----------
Total from investment operations ............................. 1.30
----------
Less distributions:
Dividends from net investment income ....................... (0.03)
----------
Net asset value at end of period ............................. $ 11.27
==========
Total return(b) .............................................. 12.98%
==========
RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) ......................... $ 2,362
==========
Ratio of net expenses to average net assets(c)(d) ............ 1.50%
Ratio of net investment income to average net assets(d) ...... 0.33%
Portfolio turnover rate(d) ................................... 200%
(a) Represents the period from the initial public offering of shares (July 1,
1999) through May 31, 2000.
(b) Not annualized.
(c) Absent fee waivers and expense reimbursements by the Adviser, the ratio of
expenses to average net assets would have been 4.23%(d) for the period
ended May 31, 2000 (Note 3).
(d) Annualized.
See accompanying notes to financial statements.
18
<PAGE>
ATALANTA/SOSNOFF FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 2000
================================================================================
MARKET
COMMON STOCKS -- 96.0% SHARES/PAR VALUE
--------------------------------------------------------------------------------
CAPITAL GOODS -- 1.1%
Tyco International Limited ....................... 4,400 $ 207,075
------------
COMMUNICATION SERVICES -- 3.7%
Crown Castle International* ...................... 6,000 157,125
Nextel Communications - Class A* ................. 1,800 166,725
Vodafone AirTouch PLC ............................ 7,665 351,153
------------
675,003
------------
CONSUMER CYCLICALS -- 5.3%
Best Buy* ........................................ 3,000 192,000
Circuit City Stores - Circuit City Group ......... 4,300 214,194
Costco Wholesale* ................................ 7,000 223,562
Lowe's ........................................... 7,600 353,875
------------
983,631
------------
CONSUMER STAPLES -- 16.7%
Anheuser-Busch ................................... 4,000 310,000
AT&T Corporation - Liberty Media Group - Class A* 13,000 576,063
Cablevision Systems - Class A* ................... 4,900 306,863
Fox Entertainment Group - Class A* ............... 13,700 357,912
Kimberly-Clark ................................... 4,700 284,350
McDonald's ....................................... 8,000 286,500
Mediaone* ........................................ 4,200 280,612
News Corporation Limited - ADR ................... 7,000 274,312
Viacom - Class B* ................................ 6,727 417,074
------------
3,093,686
------------
ENERGY -- 9.2%
Diamond Offshore Drilling ........................ 7,000 286,125
R&B Falcon* ...................................... 32,900 771,094
Santa Fe International ........................... 5,900 228,994
Transocean Sedco Forex ........................... 8,600 423,012
------------
1,709,225
------------
FINANCIAL -- 14.7%
Ace Limited ...................................... 21,400 573,788
American International Group ..................... 3,375 379,898
Aon .............................................. 8,000 281,000
CIT Group - Class A .............................. 11,000 201,438
Citigroup ........................................ 3,850 239,422
Loews ............................................ 5,600 368,900
XL Capital Limited ............................... 11,300 672,350
------------
2,716,796
------------
19
<PAGE>
ATALANTA/SOSNOFF FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
================================================================================
MARKET
COMMON STOCKS -- 96.0% (continued) SHARES/PAR VALUE
--------------------------------------------------------------------------------
HEALTH CARE -- 21.9%
American Home Products ........................... 14,200 $ 765,025
Amgen* ........................................... 2,600 165,425
Bristol-Myers Squibb ............................. 9,600 528,600
ICN Pharmaceuticals .............................. 8,300 288,944
Johnson & Johnson ................................ 6,000 537,000
Merck ............................................ 9,000 671,625
Oxford Health Plans* ............................. 19,200 408,000
Wellpoint Health Networks* ....................... 9,300 675,412
------------
4,040,031
------------
TECHNOLOGY -- 20.0%
Apple Computer* .................................. 5,300 445,200
Applied Materials* ............................... 4,700 392,450
Computer Associates International ................ 9,600 494,400
Corning .......................................... 1,700 328,844
First Data ....................................... 5,200 291,525
IBM .............................................. 5,600 600,950
Intel ............................................ 5,200 648,050
Motorola ......................................... 5,300 496,875
------------
3,698,294
------------
UTILITIES -- 3.4%
AES* ............................................. 3,400 296,650
Dynegy - Class A ................................. 4,200 323,925
------------
620,575
------------
TOTAL COMMON STOCKS (Cost $16,505,760) ........... $ 17,744,316
------------
CONVERTIBLE CORPORATE BONDS -- 1.7%
Sirus Satellite Radio Sub. Conv., 8.75%, 09/29/09
(Cost $200,000) .................................. $ 200,000 $ 310,000
------------
CASH EQUIVALENTS -- 4.6%
Firstar Stellar Treasury Fund (Cost $855,900) .... 855,900 $ 855,900
------------
TOTAL INVESTMENT SECURITIES -- 102.3% (Cost $17,561,660) $ 18,910,216
LIABILITIES IN EXCESS OF OTHER ASSETS -- (2.3%) .. (424,810)
------------
NET ASSETS -- 100.0% ............................. $ 18,485,406
=============
* Non-income producing security.
ADR - American Depositary Receipt.
See accompanying notes to financial statements.
20
<PAGE>
ATALANTA/SOSNOFF FOCUS FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 2000
================================================================================
MARKET
COMMON STOCKS -- 99.5% SHARES VALUE
--------------------------------------------------------------------------------
COMMUNICATION SERVICES -- 5.0%
Crown Castle International* ...................... 1,800 $ 47,137
Nextel Communications - Class A* ................. 300 27,788
Vodafone AirTouch PLC ............................ 1,179 54,013
------------
128,938
------------
CONSUMER CYCLICALS -- 5.1%
Circuit City Stores - Circuit City Group ......... 600 29,887
Costco Wholesale* ................................ 900 28,744
Lowe's ........................................... 1,600 74,500
------------
133,131
------------
CONSUMER STAPLES -- 11.6%
Anheuser-Busch ................................... 900 69,750
AT&T Corporation - Liberty Media Group - Class A* 1,600 70,900
McDonald's ....................................... 1,400 50,138
Sirius Satellite Radio* .......................... 1,300 49,238
Viacom - Class B* ................................ 976 60,512
------------
300,538
------------
ENERGY -- 10.3%
Diamond Offshore Drilling ........................ 1,000 40,875
Nabors Industries* ............................... 600 25,800
R&B Falcon* ...................................... 4,700 110,156
Santa Fe International ........................... 800 31,050
Transocean Sedco Forex ........................... 1,200 59,025
------------
266,906
------------
FINANCIAL -- 15.4%
Ace Limited ...................................... 4,000 107,250
American International Group ..................... 500 56,281
Aon .............................................. 1,100 38,637
Citigroup ........................................ 900 55,969
Loews ............................................ 600 39,525
XL Capital Limited ............................... 1,800 107,100
------------
404,762
------------
HEALTH CARE -- 26.8%
American Home Products ........................... 2,500 134,687
Amgen* ........................................... 400 25,450
Bristol-Myers Squibb ............................. 1,300 71,581
Johnson & Johnson ................................ 900 80,550
Merck ............................................ 1,900 141,788
Oxford Health Plans* ............................. 3,500 74,375
Wellpoint Health Networks* ....................... 2,300 167,038
------------
695,469
------------
21
<PAGE>
ATALANTA/SOSNOFF FOCUS FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
================================================================================
MARKET
COMMON STOCKS -- 99.5% (CONTINUED) SHARES VALUE
--------------------------------------------------------------------------------
TECHNOLOGY -- 22.1%
Apple Computer* .................................. 800 $ 67,200
Applied Materials* ............................... 600 50,100
Computer Associates International ................ 1,600 82,400
Corning .......................................... 300 58,031
IBM .............................................. 700 75,119
Intel ............................................ 1,100 137,088
Motorola ......................................... 1,100 103,125
------------
573,063
------------
UTILITIES -- 3.2%
AES* ............................................. 500 43,625
Dynegy - Class A ................................. 500 38,562
------------
82,187
------------
TOTAL COMMON STOCKS (Cost $2,518,581) ............ $ 2,584,994
------------
TOTAL INVESTMENT SECURITIES -- 99.5% (Cost $2,518,581) $ 2,584,994
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.5% .... 13,043
------------
NET ASSETS -- 100.0% ............................. $ 2,598,037
============
* Non-income producing security.
See accompanying notes to financial statements.
22
<PAGE>
ATALANTA/SOSNOFF VALUE FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 2000
================================================================================
MARKET
COMMON STOCKS -- 94.9% SHARES VALUE
--------------------------------------------------------------------------------
CAPITAL GOODS -- 1.8%
CE Franklin Limited* ............................. 6,000 $ 37,500
------------
CONSUMER CYCLICALS -- 6.9%
Quanta Services* ................................. 3,000 147,000
------------
CONSUMER STAPLES -- 3.7%
Anheuser-Busch ................................... 400 31,000
Pepsi Bottling Group ............................. 2,000 52,250
------------
83,250
------------
ENERGY -- 35.4%
Global Marine* ................................... 6,000 169,875
Key Energy Services* ............................. 7,500 81,563
Marine Drilling* ................................. 2,200 63,250
Nabors Industries* ............................... 2,000 86,000
R&B Falcon* ...................................... 7,000 164,062
Rowan* ........................................... 3,000 93,188
Transocean Sedco Forex ........................... 2,000 98,375
------------
756,313
------------
FINANCIAL -- 22.6%
Ace Limited ...................................... 5,500 147,469
Aon .............................................. 2,600 91,325
Everest Re Group Limited ......................... 2,600 88,400
XL Capital Limited ............................... 2,600 154,700
------------
481,894
------------
HEALTH CARE -- 4.8%
Healthcare Company ............................... 900 24,300
Oxford Health Plans* ............................. 1,600 34,000
Tenet Healthcare ................................. 1,700 43,562
------------
101,862
------------
TECHNOLOGY -- 5.1%
Nortel Networks .................................. 2,000 108,625
------------
UTILITIES -- 14.6%
AES* ............................................. 1,000 87,250
Dynegy - Class A ................................. 1,097 84,606
El Paso Energy ................................... 2,700 139,050
------------
310,906
------------
23
<PAGE>
ATALANTA/SOSNOFF VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
================================================================================
MARKET
COMMON STOCKS -- 94.9% (continued) SHARES VALUE
--------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $1,749,345) ............ $ 2,027,350
------------
CASH EQUIVALENTS -- 5.4%
Firstar Stellar Treasury Fund (Cost $115,823) .... 115,823 $ 115,823
------------
TOTAL INVESTMENT SECURITIES-- 100.3% (Cost $1,865,168) $ 2,143,173
------------
LIABILITIES IN EXCESS OF OTHER ASSETS-- (0.3%) (6,360)
------------
NET ASSETS-- 100.0% $ 2,136,813
============
* Non-income producing security.
See accompanying notes to financial statements.
24
<PAGE>
ATALANTA/SOSNOFF BALANCED FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 2000
================================================================================
MARKET
COMMON STOCKS -- 74.3% SHARES/PAR VALUE
--------------------------------------------------------------------------------
COMMUNICATION SERVICES -- 3.2%
Crown Castle International* ...................... 800 $ 20,950
Vodafone AirTouch PLC ............................ 1,179 54,013
------------
74,963
------------
CONSUMER CYCLICALS -- 5.3%
Best Buy* ........................................ 400 25,600
Circuit City Stores - Circuit City Group ......... 600 29,888
Lowe's ........................................... 1,500 69,844
------------
125,332
------------
CONSUMER STAPLES -- 7.3%
Anheuser-Busch ................................... 500 38,750
AT&T Corporation - Liberty Media Group - Class A* 1,100 48,744
McDonald's ....................................... 700 25,069
Viacom - Class B* ................................ 976 60,512
------------
173,075
------------
ENERGY -- 7.0%
Diamond Offshore Drilling ........................ 900 36,788
R&B Falcon* ...................................... 2,900 67,969
Santa Fe International ........................... 800 31,050
Transocean Sedco Forex ........................... 600 29,512
------------
165,319
------------
FINANCIAL -- 13.6%
Ace Limited ...................................... 2,700 72,394
American International Group ..................... 200 22,512
Aon .............................................. 1,000 35,125
Citigroup ........................................ 800 49,750
Heller Financial ................................. 1,600 30,200
Loews ............................................ 700 46,112
XL Capital Limited ............................... 1,100 65,450
------------
321,543
------------
HEALTH CARE -- 18.9%
American Home Products ........................... 1,400 75,425
Amgen* ........................................... 400 25,450
Bristol-Myers Squibb ............................. 1,200 66,075
Johnson & Johnson ................................ 800 71,600
Merck ............................................ 800 59,700
Oxford Health Plans* ............................. 2,500 53,125
Wellpoint Health Networks* ....................... 1,300 94,412
------------
445,787
------------
25
<PAGE>
ATALANTA/SOSNOFF BALANCED FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
================================================================================
MARKET
COMMON STOCKS -- 74.3% (CONTINUED) SHARES/PAR VALUE
--------------------------------------------------------------------------------
TECHNOLOGY -- 15.9%
Apple Computer* .................................. 700 $ 58,800
Applied Materials* ............................... 700 58,450
Computer Associates International ................ 900 46,350
Corning .......................................... 100 19,344
IBM .............................................. 600 64,388
Intel ............................................ 500 62,312
Motorola ......................................... 700 65,625
------------
375,269
------------
UTILITIES -- 3.1%
AES* ............................................. 400 34,900
Dynegy - Class A ................................. 500 38,562
------------
73,462
------------
TOTAL COMMON STOCKS (Cost $1,719,598) $ 1,754,750
------------
CORPORATE BONDS -- 4.0%
Nextel Communications, 9.375%, 11/15/09
(Cost $96,975) ................................ $ 100,000 $ 94,000
------------
U.S. TREASURY BILLS -- 20.9%
U.S. Treasury Bill, 5.75%, 8/17/00
(Amortized Cost $493,712) ..................... $ 500,000 $ 494,214
------------
CASH EQUIVALENTS -- 2.5%
Firstar Stellar Treasury Fund (Cost $59,122) ..... 59,122 $ 59,122
------------
TOTAL INVESTMENT SECURITIES -- 101.7% (Cost $2,369,407) $ 2,402,086
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.7%) .. (39,664)
------------
NET ASSETS -- 100.0% ............................. $ 2,362,422
============
* Non-income producing security.
See accompanying notes to financial statements.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2000
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
The Atalanta/Sosnoff Fund, the Atalanta/Sosnoff Focus Fund, the Atalanta/Sosnoff
Value Fund and the Atalanta/Sosnoff Balanced Fund (individually, a Fund, and,
collectively, the Funds) are each a no-load series of the Atalanta/Sosnoff
Investment Trust (the Trust), an open-end management investment company
registered under the Investment Company Act of 1940. The Trust was organized as
an Ohio business trust on January 29, 1998. The Atalanta/Sosnoff Fund was
capitalized on May 6, 1998 when Atalanta/Sosnoff Capital Corporation (Delaware)
(the Adviser) purchased the initial 10,000 shares of the Fund at $10 per share.
The public offering of shares of the Atalanta/Sosnoff Focus Fund, the
Atalanta/Sosnoff Value Fund and the Atalanta/Sosnoff Balanced Fund commenced on
July 1, 1999, when the Adviser purchased the initial 200,000 shares of each Fund
at $10 per share. The public offering of shares of the Atalanta/Sosnoff Fund
commenced on June 17, 1998. The Funds had no operations prior to the public
offering of their respective shares except for the initial issuance of shares.
The Atalanta/Sosnoff Fund seeks long-term capital appreciation, through equity
investments in companies which the Adviser believes are entering into a period
of accelerating earnings momentum.
The Atalanta/Sosnoff Focus Fund is a non-diversified fund that seeks long-term
capital appreciation by concentrating its investments in a core position of
20-25 common stocks of companies which the Adviser believes are entering into a
period of accelerating earnings momentum.
The Atalanta/Sosnoff Value Fund seeks long-term capital appreciation by
investing primarily in equity securities which the Adviser believes are
fundamentally undervalued.
The Atalanta/Sosnoff Balanced Fund seeks to preserve capital while producing
long-term capital appreciation by investing in a blend of common stocks and
fixed-income securities.
The following is a summary of the Funds' significant accounting policies:
Securities valuation -- The Funds' portfolio securities are valued as of the
close of the regular session of trading on the New York Stock Exchange (normally
4:00 p.m., Eastern time). Securities which are traded on stock exchanges or are
quoted by NASDAQ are valued at the last reported sale price or, if not traded on
a particular day, at the closing bid price. Securities traded in the
over-the-counter market, and which are not quoted by NASDAQ, are valued at the
last sale price, if available, otherwise, at the last quoted bid price.
Securities for which market quotations are not readily available are valued at
fair value as determined in good faith in accordance with consistently applied
procedures established by and under the general supervision of the Board of
Trustees.
Share valuation -- The net asset value per share of each Fund is calculated
daily by dividing the total value of each Fund's assets, less liabilities, by
the number of shares outstanding, rounded to the nearest cent. The offering and
redemption price per share of each Fund is equal to the net asset value per
share.
Investment income -- Dividend income is recorded on the ex-dividend date.
Interest income is accrued as earned.
Distributions to shareholders -- For the Atalanta/Sosnoff Fund, the
Atalanta/Sosnoff Focus Fund and the Atalanta/Sosnoff Value Fund dividends
arising from net investment income, if any, are declared and paid annually to
shareholders of each Fund. For the Atalanta/Sosnoff Balanced Fund dividends
arising from net investment income, if any, are declared and paid quarterly to
shareholders of the Fund. Net realized short-term capital gains, if any, may be
distributed throughout the year and net realized long-term capital gains, if
any, are distributed at least once each year. Income dividends and capital gain
distributions are determined in accordance with income tax regulations.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
Security transactions -- Security transactions are accounted for on trade date.
Securities sold are determined on a specific identification basis.
Organization costs -- Costs incurred by the Atalanta/Sosnoff Fund in connection
with its organization and registration of shares, net of certain expenses, have
been capitalized and are being amortized on a straight-line basis over a five
year period beginning with the commencement of operations.
Estimates -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period. Actual results could
differ from those estimates.
Federal income tax -- It is each Fund's policy to comply with the special
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies. As provided therein, in any fiscal year in which a Fund so
qualifies and distributes at least 90% of its taxable net income, the Fund (but
not the shareholders) will be relieved of federal income tax on the income
distributed. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
The following information is based upon the federal income tax cost of the
investment securities as of May 31, 2000:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
ATALANTA/SOSNOFF ATALANTA/SOSNOFF ATALANTA/SOSNOFF ATALANTA/SOSNOFF
FUND FOCUS FUND VALUE FUND BALANCED FUND
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized appreciation ... $ 2,177,455 $ 230,773 $ 292,931 $ 144,974
Gross unrealized depreciation ... (876,555) (169,477) (14,926) (115,409)
------------ ------------ ------------ ------------
Net unrealized appreciation ..... $ 1,300,900 $ 61,296 $ 278,005 $ 29,565
============ ============ ============ ============
Federal income tax cost ......... $ 17,609,316 $ 2,523,698 $ 1,865,168 $ 2,372,521
============ ============ ============ ============
-------------------------------------------------------------------------------------------------------------
</TABLE>
The difference between the federal income tax cost and the financial statement
cost of portfolio investments is due to certain timing differences in the
recognition of capital losses under income tax regulations and generally
accepted accounting principles.
As of May 31, 2000, the Atalanta/Sosnoff Value Fund had capital loss
carryforwards for federal income tax purposes of $135,920, which expire May 31,
2008. These capital loss carryforwards may be utilized in future years to offset
net realized gains prior to distributing any such gains to shareholders.
Reclassification of capital accounts - For the period ended May 31, 2000, the
Atalanta/Sosnoff Fund reclassified net investment losses of $11,528 against
paid-in capital and $132,319 against accumulated net realized gains from
security transactions, the Atalanta/Sosnoff Focus Fund reclassified net
investment losses of $17,309 against accumulated net realized gains from
security transactions and the Atalanta/Sosnoff Value Fund reclassified net
investment losses of $6,841 against paid-in capital on the Statements of Assets
and Liabilities. Such reclassifications, the result of permanent differences
between financial statement and income tax reporting requirements, have no
effect on the Funds' net assets or net asset value per share.
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
2. INVESTMENT TRANSACTIONS
Investment transactions, other than short-term investments, were as follows for
the period ended May 31, 2000:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
ATALANTA/SOSNOFF ATALANTA/SOSNOFF ATALANTA/SOSNOFF ATALANTA/SOSNOFF
FUND FOCUS FUND VALUE FUND BALANCED FUND
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases of investment securities .. $ 24,361,008 $ 5,766,467 $ 8,270,561 $ 4,390,375
Proceeds from sales of
investment securities.............. $ 22,499,663 $ 3,643,674 $ 6,385,297 $ 2,802,355
------------------------------------------------------------------------------------------------------------------
</TABLE>
3. TRANSACTIONS WITH AFFILIATES
The President of the Trust is also Executive Vice President of the Adviser and
the President and Chief Executive Officer of Atalanta/Sosnoff Management
Corporation (the Distributor), the principal underwriter for each Fund and
exclusive agent for the distribution of Fund shares. The Vice President of the
Trust is also Vice President of the Adviser. Certain other officers of the Trust
are also officers of Integrated Fund Services, Inc. (IFS), the administrative
services agent, shareholder servicing and transfer agent and accounting services
agent for the Trust.
INVESTMENT ADVISORY AGREEMENT
The Funds' investments are managed by the Adviser pursuant to the terms of an
Investment Advisory Agreement. Each Fund pays the Adviser an investment advisory
fee, computed and accrued daily and paid monthly, at an annual rate of 0.75% of
average daily net assets of each Fund.
The Adviser currently intends to voluntarily waive its investment advisory fees
and reimburse the Funds for expenses incurred to the extent necessary to limit
total operating expenses of each Fund to a maximum level of 1.50% of each Fund's
average daily net assets. Accordingly, the Adviser waived investment advisory
fees of $43,963 and reimbursed $28,595 of other operating expenses for the
Atalanta/Sosnoff Fund, waived its investment advisory fees of $16,649 and
reimbursed $41,434 of other operating expenses for the Atalanta/Sosnoff Focus
Fund, waived its investment advisory fees of $13,419 and reimbursed $47,597 of
other operating expenses for the Atalanta/Sosnoff Value Fund and waived its
investment advisory fees of $15,837 and reimbursed $42,518 of other operating
expenses for the Atalanta/Sosnoff Balanced Fund during the period ended May 31,
2000.
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement, IFS supplies non-investment
related statistical and research data, internal regulatory compliance services
and executive and administrative services for the Funds. IFS supervises the
preparation of tax returns, reports to shareholders of each Fund, reports to and
filings with the Securities and Exchange Commission and state securities
commissions and materials for meetings of the Board of Trustees. For these
services, IFS receives a monthly fee at an annual rate of 0.15% on each Fund's
average daily net assets up to $50 million; 0.125% on such net assets between
$50 million and $100 million; and 0.10% on such net assets in excess of $100
million, subject to a $1,000 minimum monthly fee for each Fund.
ACCOUNTING SERVICES AGREEMENT
Under the terms of an Accounting Services Agreement, IFS calculates the daily
net asset value per share and maintains the financial books and records of each
Fund. For these services, IFS receives a fee, based on current asset levels, of
$2,000 per month from each Fund. In addition, each Fund reimburses IFS for
out-of-pocket expenses related to the pricing of each Fund's portfolio
securities.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
TRANSFER AGENT AGREEMENT
Under the terms of a Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement, IFS maintains the records of each shareholder's account,
answers shareholders' inquiries concerning their accounts, processes purchases
and redemptions of each Fund's shares, acts as dividend and distribution
disbursing agent and performs other shareholder service functions. For these
services, IFS receives a monthly fee at an annual rate of $20 per shareholder
account from each Fund, subject to a $1,500 minimum monthly fee for each Fund.
In addition, each Fund reimburses IFS for out-of-pocket expenses including, but
not limited to, postage and supplies.
SERVICE PLAN
The Trust has adopted a Service Plan (the Plan) under which each Fund
compensates the Distributor for services related to the distribution and
promotion of Fund shares. Each Fund pays the Distributor a fee, computed and
accrued daily and paid monthly, at an annual rate of 0.25% of the average daily
net assets of each Fund. During the period ended May 31, 2000, the
Atalanta/Sosnoff Fund, the Atalanta/Sosnoff Focus Fund, the Atalanta/Sosnoff
Value Fund and the Atalanta/Sosnoff Balanced Fund incurred expenses of $40,815,
$5,560, $4,481 and $5,288, respectively, under the Plan.
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INDEPENDENT AUDITOR'S REPORT
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ARTHUR ANDERSEN
To the Shareholders and Board of Trustees of the Atalanta/Sosnoff Investment
Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of the Atalanta/Sosnoff Investment Trust
(comprising, respectively, the Atalanta/Sosnoff Fund, the Atalanta/Sosnoff Focus
Fund, the Atalanta/Sosnoff Value Fund and the Atalanta/Sosnoff Balanced Fund) as
of May 31, 2000, and the related statements of operations for the periods then
ended, the statements of changes in net assets and financial highlights for each
of the periods indicated thereon. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of May 31, 2000, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective funds constituting the Atalanta/Sosnoff Investment Trust, as
of May 31, 2000, the results of their operations for the periods then ended and
the changes in their net assets and financial highlights for the periods
indicated thereon in conformity with accounting principles generally accepted in
the United States.
/s/ Arthur Anderson LLP
Cincinnati, Ohio
July 12, 2000
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