Dear Fellow Shareholder,
We are pleased to present the first annual report for the SMT Fund for
the year ending May 31, 1999.
Moderate but consistent growth, low inflation and better than expected
corporate earnings provided a positive environment for U.S. stock investors.
These factors, along with significant flows of cash into equity mutual funds,
helped the unmanaged S&P 500 Index post a 18.91% gain during the reporting
period compared to 33.14% for the SMT Fund.
With longer-term indicators pointing to an overvalued market, the SMT
Fund will continue to keep a tight rein on the periods it invests in equities
and always remain prepared to quickly move into cash when our short-term system
turns bearish.
If you have any questions, please call us at 1-877-SMT-FUND. We look
forward to serving your investment needs for many years to come.
Sincerely,
Craig M. Pauly
President
<PAGE>
________________________________________________________________________________
GROWTH OF A $10,000 INVESTMENT
[Graph comparing the growth of a $10,000 investment in the Fund to the growth of
a $10,000 investment in the S&P 500 for the period from 6/5/98 through 5/31/99]
________________________________________________________________________________
Total Return for the Period
From Inception (6/5/98)
to 5/31/99
The SMT Fund 33.14%
S&P 500 18.91%
Past performance does not predict future performance
The value of your shares may fluctuate and be worth more
or less than their original cost at the time of redemption.
<PAGE>
SMT FUND
- --------
SCHEDULE OF INVESTMENTS
- -----------------------
As of May 31, 1999
Number Market
of Shares Value
----------- ----------
Common Stocks - 95.89%
- ----------------------
Airlines - 7.40%
Delta Airlines $10,900 $625,388
UAL Corporation * 8,900 598,525
Banks - 3.73%
Bank One Corporation 10,900 616,537
Communication - 7.92%
MCI Worldcom Inc. * 7,300 630,537
Qwest Communication * 16,000 679,000
Computer Equipment/Service - 11.72%
America Online Inc. * 5,300 632,687
Lucent Technology 10,900 619,937
Tellabs Inc. * 11,700 684,450
Computer Systems - 15.13%
Cisco Systems, Inc. * 5,800 631,475
Hewlett-Packard Co. 6,700 631,894
International Business Machine 5,300 616,456
Sun Microsystems * 10,400 621,400
Conglomerate - 3.75%
General Electric 6,100 620,294
Discount/Brokerage Service - 7.72%
Charles Schwab 6,100 645,456
Donaldson Lufkin & Jenrette Inc. 9,400 629,800
*Non-income producing securities.
<PAGE>
Number Market
of Shares Value
--------- -----
Drugs & Health Care - 7.78%
Lilly Eli & Company 9,300 664,369
Merck & Company, Inc. 9,200 621,000
Financial Services - 15.69%
Citigroup Inc. 9,700 $642,625
American Express Co. 5,300 642,294
Equitable Companies Inc. 9,300 652,744
Morgan Stanley, Dean Witter
& Co. 6,800 656,200
Semiconductors - 11.35%
Applied Materials * 11,400 626,287
Intel Corporation 11,800 637,938
Texas Instruments 5,600 612,500
Telecommunications - 3.70%
Nokia Corporation 8,600 610,600
Total Common Stocks $ 15,850,393
----------
(cost $15,792,247)
Money Market- 100.03 %
- ----------------------
Firstar Bank Treasury Fund
Total Money Market $ 16,534,954
-----------
(cost $16,534,954)
Total Investments -195.92%
- ----------------------------
(Identified cost $32,327,201) $32,385,347
-----------
Other Assets and Liabilities, Net - (95.92)% (15,855,357)
- -------------------------------------------- ------------
Net Assets - 100% $ 16,529,990
============
The accompanying notes are an integral part of these financial statements.
<PAGE>
SMT FUND
- --------
STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------
As of May 31, 1999
ASSETS
Investments, at value (cost $32,327,201) ................ $ 32,385,347
Receivable interest...................................... 36,907
Receivable dividend...................................... 2,171
Receivable for shares of beneficial interest sold ....... 107,146
Receivable for investments sold.......................... 16,329,254
Deferred organization costs ............................. 35,212
--------
Total assets ............................................ 48,896,037
LIABILITIES
Payable for investments purchased........................ 32,249,667
Payable for commissions due.............................. 23,744
Payable for shares purchased............................ 30,000
Accrued management fees.................................. 61,309
Accrued other fees....................................... 1,327
----------
Total liabilities ....................................... 32,366,047
NET ASSETS ................................................... $ 16,529,990
============
Net assets consist of:
Paid-in capital ......................................... 14,701,857
Net unrealized appreciation in value of investments..... 58,146
Accumulated undistributed net realized gain on investments 1,769,987
-----------
Net assets .............................................. $ 16,529,990
===========
Shares of capital stock
outstanding (no par value,
unlimited shares authorized)............................. 1,349,619
Net asset value, offering
and redemption price per share .......................... $ 12.25
The accompanying notes are an integral part of these financial statements.
<PAGE>
SMT FUND
- --------
STATEMENT OF OPERATIONS
- -----------------------
For the period June 5, 1998 (commencement of investment operations)
to May 31, 1999
INVESTMENT INCOME
Income:
Interest ................................................ $ 319,240
Dividends ............................................... 12,749
-------
Total net income ................................... 331,989
-------
Expenses:
Management fees expense.................................. 531,976
Trustee fee expense ..................................... 3,245
Organization expense..................................... 8,207
------
Total expenses....................................... 543,428
--------
NET INVESTMENT INCOME (LOSS).................................. (211,439)
---------
REALIZED AND UNREALIZED GAIN(LOSS)
ON INVESTMENTS
Net realized gain on investments......................... 2,961,344
Change in unrealized appreciation of investments ........ 58,146
------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................... $ 2,808,051
============
The accompanying notes are an integral part of these financial statements.
<PAGE>
SMT FUND
- --------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------
For the period June 5, 1998 (commencement of investment operations)
to May 31, 1999
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ................................... $ (211,439)
Net change in unrealized appreciation of investments..... 58,146
Net realized gain on investments ........................ 2,961,344
---------
Increase in net assets resulting from operations ........ 2,808,051
---------
Dividends and distributions to shareholders from:
Net realized gains ...................................... (979,918)
---------
Total increase .............................................. 1,828,133
Capital share transactions:
Proceeds from shares sold ............................... 15,962,586
Dividend reinvested...................................... 979,918
Cost of shares redeemed.................................. (2,240,647)
-----------
Increase in net assets resulting from capital share transactions 14,701,857
----------
TOTAL INCREASE IN NET ASSETS.................................. 16,529,990
NET ASSETS:
Beginning of period ..................................... ---
End of period (including accumulated undistributed net
investment income $0) ............................. $ 16,529,990
==========
Shares of capital stock of the Fund sold and redeemed:
Shares sold ............................................. 1,451,269
Shares reinvested........................................ 87,885
Shares redeemed.......................................... (189,535)
---------
NET INCREASE IN NUMBER
OF SHARES OUTSTANDING ................................... 1,349,619
==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
SMT FUND
- --------
FINANCIAL HIGHLIGHTS
- --------------------
Year
Ended
May 31,
1999
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning ................................... $ 10.00
from investment
Operations:
Net investment income ................................... (0.22)
Net realized and unrealized
gain (loss) on investments.......................... 3.44
----
Total from investment income ............................ 3.22
Less distributions:
Dividends from realized gains............................ (0.97)
Dividend from net investment income...................... 0.00
----
Total distribution ........................................... (0.97)
Net asset value at end of period ............................. $ 12.25
======
TOTAL RETURN (a).............................................. 33.14%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period................................ $16,529,990
Ratio of expenses to average net assets (b).................. 4.99
Ratio of net investment income to average net assets:......... (1.94%)
Portfolio turnover ...................................... 10,710.86%
(a) For the period June 5, 1998 (commencement of operations) to May 31, 1999.
(b) Annualized.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
Note 1 - General
The SMT Fund (the "Fund") was organized as a series of Securities Management &
Timing Funds, an Ohio business trust (the"Trust") on February 20, 1998. The SMT
Fund is a diversified, open-end mutual fund whose investment objective is to
provide long term capital appreciation. The Fund seeks to achieve this objective
by following a market timing strategy which is based on a proprietary investment
model developed by Securities Management & Timing, Inc., the Fund's adviser. The
Fund attempts to be "in the market" (invested in a broad range of common stocks)
when the market is rising and "out of the market" (invested in money market
instruments) when the market is declining.
The Adviser's market timing strategy uses a proprietary, computer-driven
technical model that generates buy and sell signals. When the technical
indicators in the model generate a buy signal, the Fund will substantially
invest in a broad range of high quality stocks selected by the Adviser. When the
indicator generates a sell signal, the stocks will be sold and the proceeds
invested in money market instruments.
Note 2 - Significant Accounting Policies
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements.
A) Security Valuations
Securities which are traded on any exchange or on the NASDAQ over-the-counter
market are valued at the last quoted sale price. Lacking a last sale price, a
security is valued at its last bid price except when, in the Adviser's opinion,
the last bid price does not accurately reflect the current value of the
security. All other securities for which over-the-counter market quotations are
readily available are valued at their last bid price. When market quotations are
not readily available, when the Adviser determines the last bid price does not
accurately reflect the current value or when restricted securities are being
valued, such securities are valued as determined in good faith by the Adviser,
subject to review of the Board of Trustees of the Trust.
B) Securities Transactions and Related Income
Securities transactions are recorded on a trade date. Realized gains and losses
from securities transactions are recorded on the identified cost basis. Interest
income is recorded on the accrual basis and dividend income is recorded on the
ex-dividend date.
C) Dividends and Distributions to Shareholders
The Fund intends to distribute substantially all of its net investment income as
dividends to its shareholders on an annual basis, and intends to distribute its
net long-term capital gains and its short-term capital gains at least once a
year. However, to the extent that net realized gains of the Fund could be
reduced by any capital loss carry-overs, such gains will not be distributed.
D) Federal Income Taxes
It is the policy of the Fund to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to its shareholders.
E) Expenses
Organizational costs represent costs incurred in connection with the
organization and the initial public offering of the Fund. Organizational costs
are deferred and will be amortized on a straight-line basis over five years. In
the event that the original shareholder (or any subsequent transferee) redeems
any of its original capital (seed capital) prior to these organizational costs
being fully amortized, the redemption proceeds will be reduced by a pro-rata
portion of any then unamortized organizational costs.
At May 31, 1999, the unamortized balance was $35,212.
F) Estimates
Preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Note 3 - Agreements and Other Transactions with Affiliates
The Fund retains Securities Management & Timing, Inc., (the "Adviser") to manage
the Fund's investments. The Fund is authorized to pay the Adviser a fee equal to
an annual average rate of 4.95% of its average daily net assets, minus the
amount by which the Fund's total expenses (including organizational expenses,
but excluding brokerage, taxes, interest and extraordinary expenses) exceeds
4.99%. The Adviser pays all of the operating expenses of the Fund except
brokerage, taxes, interest, fees and expenses on non-interested persons trustees
and extraordinary expenses. At May 31, 1999 the Adviser has earned $531,976. The
officers of the Adviser are also officers, directors, and shareholders of the
Fund.
The Fund retains Unified Fund Services, Inc., (the "Administrator") to manage
the Fund's business affairs and provide the Fund with administrative services,
including all regulatory reporting and necessary office equipment, personnel and
facilities. The Fund also retains Unified Fund Services, Inc. (the Transfer
Agent) to serve as transfer agent, dividend paying agent and shareholder service
agent. For its services as Administrator, Unified Fund Services, Inc. receives a
monthly fee from the Adviser equal to an annual average rate of 0.08% of the
Fund's average daily net assets, subject to an annual minimum fee of $17,500.
The Fund retains Unified Management Corporation, (the"Distributor") to act as
the principal distributor of the Fund's shares. The services of the
Administrator, Transfer Agent, and Distributor are operating expenses paid by
the Adviser.
Note 4- Securities Transactions
For the period ended May 31, 1999, purchases and sales proceeds from investment
securities, excluding short-term investments were as follows:
Purchases Sales
The SMT Fund $ 328,443,626 $ 315,612,723
Note 5- Unrealized Appreciation (Depreciation)
At May 31, 1999, the composition of unrealized appreciation (the excess of value
over tax cost) and depreciation(the excess of tax cost over value) was as
follows:
<TABLE>
<S> <C> <C> <C> <C>
Net Appreciation
Fund Appreciation Depreciation (Depreciation)
------------ ------------ ------------ --------------
SMT Fund $ 91,405 $ (33,259) $ 58,146
</TABLE>
Note 6- Reclassification of Capital Accounts
In accordance with AICPA Statement of Position 93-2, the components of nets
assets of the Fund have been reclassified to the extent that the net investment
loss of ($211,439) sustained during the period ended May 31, 1999, which
represents a permanent difference for income tax purposes, has been reclassified
as a decrease in accumulated undistributed net realized gain on investments.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and
Board of Trustees
The SMT Fund
We have audited the accompanying statement of assets and liabilities of the SMT
Fund, including the schedule of portfolio investments, as of May 31, 1999, and
the related statement of operations for the year then ended, the statement of
changes in net assets for the year then ended, and financial highlights for the
period from June 5, 1998 (commencement of operations) to May 31, 1999 in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund'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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments and cash held as
of May 31, 1999 by correspondence with the custodian and broker. 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 the
SMT Fund as of May 31, 1999, the results of its operations for the year then
ended, the changes in its net assets for the year then ended, and the financial
highlights for the period from June 5, 1998 (commencement of operations) to May
31, 1999 in the period then ended, in conformity with generally accepted
accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
June 22, 1999
<PAGE>
Year 2000 Issue: (Unaudited)
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by the Adviser, Administrator or other service providers to the Fund do not
properly process and calculate date-related information and data from January 1,
2000. This is commonly known as the "Year 2000 Issue". The Adviser and
Administrator have taken steps that they believe are reasonably designed to
address the Year 2000 Issue with respect to computer systems that are used and
have obtained reasonable assurances that comparable steps are being taken by the
Fund's major service providers. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact on the Fund. In
addition, the Adviser cannot make any assurances that the Year 2000 issue will
not affect the companies in which the Fund invests or worldwide markets and
economies.
