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Previous: FIRST TARGET ACQUISITION INC, 10QSB, 1999-02-04 |
Next: AGRI BIO SCIENCES INC, SB-2/A, 1999-02-04 |
<PAGE>
Puget Sound Alternative Investment Series Trust
Puget Sound Market Neutral Portfolio
SEMI-ANNUAL REPORT
NOVEMBER 30, 1998
[LOGO APPEARS HERE]
<PAGE>
[Logo Puget Sound Alternative Investment Series Trust]
Post Office Box 182304 . Columbus, Ohio . 43218-2304 . Toll Free (877) 777-8438
Dear Fellow Shareholder:
We are pleased to present this semi-annual report for the six months ended
November 30, 1998, a period marked by volatility in market level and sentiment.
When the Puget Sound Market Neutral Portfolio was launched in June of this year,
we believed then, and continue to believe now, that investors such as you seek
opportunities for investment selection and the avoidance of risk during volatile
----------------------------------------------
markets.
In that context, investor's opportunities for selection and the avoidance of
risk span a broad range of alternatives. On one hand, this extends from the
extreme overvaluation of most of the newly created Internet related stocks and
the obvious overvaluation for shares of the very large growth companies to the
many reasonably valued shares, and to some extent, very undervalued companies on
the other hand. A market neutral strategy offers you the potential to take
advantage of both overvalued and undervalued situations.
Looking ahead to 1999, we are concerned about the hyperactivity of the financial
markets. We remain committed to seeking long-term capital appreciation while
maintaining minimal exposure to general equity market risk which is the primary
objective of the Puget Sound Market Neutral Portfolio. We are concerned over
the activities of the private funds, their growing use of electronic trading
(trading that is invisible and not easily supervised) and the inadequacy of
regulation of the private funds. We firmly believe that the mutual fund
structure offers greater transparency than private funds for investments of a
non-traditional nature. We believe, in general, that the US market remains
overvalued.
In closing, we would like to thank you for your continuing support. We are
gratified by your confidence and look forward to serving your investment needs
in the area of non-traditional products. As always, please contact us with your
comments.
Best Wishes for a healthy and successful 1999.
Sincerely,
/s/ Margaret M. Towle
Margaret M. Towle
Chairperson
BISYS Fund Services, Distributor . 3435 Stelzer Road . Columbus, OH 43219
<PAGE>
Puget Sound Market Neutral Portfolio
Schedule of Portfolio Investments
November 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value
------ ------
<S> <C> <C>
Common Stocks - 76.4%
Advertising - 0.7%
Catalina Marketing Corp.* 1,000 $58,250
-------
Apparel - 2.1%
NIKE, Inc.-Class B 4,000 160,000
Stride Rite 1,000 8,875
-------
168,875
-------
Automotive Parts & Equipment - 4.1%
General Motors Corp.-Class H* 2,000 76,000
Goodyear Tire & Rubber Co. 4,000 227,000
Tower Automotive, Inc.* 1,000 22,750
-------
325,750
-------
Banking - 1.4%
Comerica, Inc. 1,000 64,500
Pacific Century Financial Corp. 1,000 21,375
Synovus Financial Corp. 1,000 22,063
-------
107,938
-------
Beverages - 2.3%
Seagram Co. Ltd. 4,000 137,250
Whitman Corp. 2,000 45,250
-------
182,500
-------
Biotechnology - 2.8%
Amgen Inc.* 3,000 225,750
-------
Chemicals - 2.1%
Engelhard Corp. 1,000 19,313
Minerals Technologies Inc. 1,000 43,875
Rohm & Haas Co. 3,000 104,812
-------
168,000
-------
Commercial Services - 2.1%
Comdisco, Inc. 1,000 18,250
Concord EFS, Inc.* 1,000 31,813
Equifax Inc. 1,000 41,500
Ogden Corp. 1,000 26,563
Paychex, Inc. 1,000 49,749
-------
167,875
-------
Computer Software - 4.6%
Adobe Systems Inc. 2,000 89,500
Ceridian Corp.* 3,000 195,187
Sterling Software, Inc.* 3,000 77,250
-------
361,937
-------
Computers - 1.8%
NCR Corp.* 2,000 74,500
Storage Technology Corp.* 1,000 35,000
</TABLE>
See notes to financial statements.
<PAGE>
Puget Sound Market Neutral Portfolio
Schedule of Portfolio Investments
November 30, 1998 (Unaudited)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stocks - (continued) Shares Value
------ -------
<S> <C> <C>
Computers (continued)
Sungard Data Systems Inc.* 1,000 $ 32,000
--------
141,500
--------
Construction - 1.2%
Armstrong World Industries, Inc. 1,000 66,625
Kaufman & Broad Home Corp. 1,000 25,188
--------
91,813
--------
Consumer Goods & Services - 1.8%
Clorox Co. 1,000 111,062
Department 56 Inc.* 1,000 34,438
--------
145,500
--------
Cosmetics - 1.4%
Alberto-Culver Co.-Class B 1,000 25,625
International Flavors & Fragrances Inc. 2,000 83,750
--------
109,375
--------
Electric Utility - 1.6%
CalEnergy Co., Inc.* 4,000 125,250
--------
Electronic Components/Instruments - 1.5%
American Power Conversion* 1,000 41,375
EG&G Inc. 1,000 27,938
Sanmina Corp.* 1,000 49,812
-------
119,125
--------
Engineering - 0.5%
Fluor Corp. 1,000 42,813
-------
Financial Services - 6.0%
American Express Co. 1,000 100,062
Fannie Mae 1,000 72,750
MBNA Corp. 10,000 226,874
SLM Holding Corp. 1,000 44,000
United Asset Management Corp. 1,000 25,313
-------
468,999
--------
Food Products - 5.5%
Great Atlantic & Pacific Tea Co. 1,000 27,313
Nabisco Holdings Corp.-Class A 3,000 119,625
Quaker Oats Co. 3,000 184,124
SYSCO Corp. 4,000 107,750
-------
438,812
--------
Health Care - 3.5%
C.R. Bard, Inc. 1,000 45,813
Lincare Holdings, Inc.* 1,000 34,500
Mallinckrodt Inc. 3,000 96,937
</TABLE>
See notes to financial statements.
<PAGE>
Puget Sound Market Neutral Portfolio
Schedule of Portfolio Investments - (continued)
November 30, 1998 (Unaudited)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stocks - (continued) Shares Value
------ --------
<S> <C> <C>
Health Care (continued)
St. Jude Medical Inc.* 2,000 $ 58,124
Stryker Corp. 1,000 42,250
--------
277,624
--------
Insurance - 2.5%
American Bankers Insurance Group 2,000 90,750
ReliaStar Financial Corp. 2,000 94,000
TIG Holdings, Inc. 1,000 14,063
--------
198,813
--------
Leisure & Recreation/Gaming - 2.4%
GTECH Holdings Corp.* 1,000 25,063
Harley-Davidson Inc. 4,000 167,250
--------
192,313
--------
Machinery - 1.1%
Ingersoll-Rand Co. 1,000 46,813
W.W. Grainger, Inc. 1,000 42,250
--------
89,063
--------
Media - 1.8%
E.W. Scripps Co.-Class A 1,000 51,438
King World Productions, Inc.* 1,000 27,250
Tribune Co. 1,000 64,125
--------
142,813
--------
Metals & Mining - 0.8%
ASARCO Inc. 1,000 19,375
Cyprus Amax Minerals Co. 4,000 45,500
--------
64,875
--------
Office Equipment & Services - 1.4%
Xerox Corp. 1,000 107,500
--------
Oil & Gas - Exploration & Production Services - 3.0%
BJ Services Co.* 6,000 82,875
Enron Oil & Gas 3,000 45,000
Helmerich & Payne 1,000 17,250
Nabors Industries, Inc.* 2,000 26,500
Tidewater Inc. 3,000 69,188
-------
240,813
--------
Packaging & Containers - 0.5%
Ball Corp. 1,000 42,750
-------
Pipelines - 1.9%
Columbia Energy Group 2,000 113,500
El Paso Energy Corp. 1,000 34,125
-------
147,625
--------
Professional Schools - 0.3%
Devry Inc.* 1,000 26,375
-------
</TABLE>
See notes to financial statements.
<PAGE>
Puget Sound Market Neutral Portfolio
Schedule of Portfolio Investments - (continued)
November 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Common Stocks - (continued) Shares Value
--------- ----------
<S> <C> <C>
Restaurants - 1.0%
Brinker International, Inc.* 1,000 $ 25,438
Darden Restaurants, Inc. 2,000 31,625
Wendy's International, Inc. 1,000 20,000
----------
77,063
----------
Retail - 5.0%
Bed, Bath and Beyond Inc.* 2,000 62,375
Heilig-Meyers Co. 1,000 7,000
Kmart Corp.* 13,000 198,249
The Men's Wearhouse, Inc.* 1,000 25,313
Walgreen Co. 2,000 107,375
----------
400,312
----------
Savings & Loans - 0.7%
Dime Bancorp, Inc. 2,000 53,125
----------
Semiconductors - 3.0%
Cypress Semiconductor Corp.* 4,000 40,750
Rockwell International Corp. 4,000 195,750
----------
236,500
----------
Steel - 0.2%
LTV Corp. 3,000 16,500
----------
Telecommunications 2.7%
ADC Telecommunications, Inc.* 3,000 89,625
Century Telephone Enterprises, Inc. 1,000 57,000
SBC Communications Inc. 1,000 47,937
Scientific-Atlanta Inc. 1,000 19,375
----------
213,937
----------
Textiles - 0.7%
Cintas Corp. 1,000 55,000
----------
Waste Management - 0.4%
Browning-Ferris Industries 1,000 29,500
----------
Total Common Stocks (Cost $5,744,034) 6,062,563
----------
Daily Sweep Vehicle - 16.7%
CTC Sweep Account 1,327,356 1,327,356
----------
Total Daily Sweep Vehicle (Cost $1,327,356) 1,327,356
----------
Total Investments (Cost $7,071,390) (a) - 93.1% 7,389,919
----------
</TABLE>
See notes to financial statements.
<PAGE>
Puget Sound Market Neutral Portfolio
Schedule of Portfolio Investments - (continued)
November 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value
--------- -----------
<S> <C> <C>
Deposits with Brokers for Securities Sold Short - 85.2%
Bear Stearns Deposit Account 6,769,221 $ 6,769,221
-----------
Total Deposits with Brokers for Securities Sold Short (Cost $6,769,221) 6,769,221
-----------
Receivable from Brokers for Securities Sold Short - 3.6% 288,479
-----------
Securities Sold Short - (79.6)% (6,321,388)
-----------
Liabilities in excess of other assets - (2.3)% (185,889)
-----------
TOTAL NET ASSETS - 100.0% $ 7,940,342
===========
</TABLE>
____________
* Non-income producing security.
(a) Represents cost for federal tax purposes and differs from value
by net unrealized appreciation as follows:
Unrealized appreciation- Investments $ 419,045
Unrealized appreciation- Short Sales 121,018
Unrealized depreciation- Investments (100,517)
Unrealized depreciation- Short Sales (738,414)
---------
Net unrealized depreciation $ (298,868)
========
See notes to financial statements.
<PAGE>
Puget Sound Market Neutral Portfolio
Schedule of Securities Sold Short
November 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value
------- -------
<S> <C> <C>
Common Stocks - 79.6%
Advertising - 2.0%
Snyder Communications, Inc. 2,000 $ 71,125
True North Communications, Inc. 3,000 84,375
--------
155,500
--------
Aerospace - 1.5%
Boeing Co. 3,000 121,875
--------
Airlines - 0.3%
Northwest Airlines Corp. 1,000 25,063
--------
Automotive Parts & Equipment - 0.7%
Federal-Mogul Corp. 1,000 56,750
--------
Biotechnology - 2.8%
Centocor, Inc. 1,000 40,500
Monsanto Co. 4,000 181,250
--------
221,750
--------
Building Materials - .9%
American Standard Companies, Inc. 2,000 68,500
--------
Chemicals - 0.3%
Cytec Industries Inc. 1,000 22,563
--------
Commercial Services - 1.1%
Metzler Group, Inc. 1,000 41,499
Parexel International Corp. 1,000 26,063
Rental Service Corp. 1,000 21,188
--------
88,750
--------
Computer Software -- 6.0%
HNC Software, Inc. 1,000 33,000
IDX Systems Corp. 1,000 41,063
Legato Systems, Inc. 1,000 47,813
Network Appliance, Inc. 1,000 75,124
Newbridge Networks Corp. 6,000 175,499
QuadraMed Corp. 1,000 24,000
Visio Corp. 1,000 35,375
Wind River Systems, Inc. 1,000 46,625
--------
478,499
--------
Computers - 1.5%
Affiliated Computer Services- Class A 1,000 38,313
Cadence Design Systems, Inc. 1,000 28,125
International Network Services 1,000 54,625
--------
121,063
--------
</TABLE>
See notes to financial statements.
<PAGE>
Puget Sound Market Neutral Portfolio
Schedule of Securities Sold Short- (continued)
November 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value
-------- ---------
<S> <C> <C>
Common Stocks - (continued)
Cosmetics - 3.6%
Estee Lauder Co.- Class A 2,000 $150,125
Gillette Co. 3,000 137,813
--------
287,938
--------
Electric Utility - 0.6%
AES Corp. 1,000 45,750
--------
Electronic Components/Instruments - 3.6%
General Cable Corp. 1,000 19,000
Millipore Corp. 1,000 28,125
Perkin - Elmer Corp. 2,000 186,500
Uniphase Corp. 1,000 54,188
--------
287,813
--------
Financial Services - 5.3%
Associates First Capital- Class A 4,000 311,499
Franklin Resources, Inc. 1,000 42,750
HealthCare Financial Partners, Inc. 1,000 32,875
Charles Schwab Corp. 600 33,825
--------
420,949
--------
Food Products - 3.5%
Suiza Foods Corp. 3,000 142,125
U.S. Foodservice 3,000 137,813
--------
279,938
--------
Health Care - 5.3%
Baxter International Inc. 1,000 63,563
Boston Scientific Corp. 1,000 49,500
Columbia/HCA Healthcare Corp. 3,000 73,874
Medtronic, Inc. 1,000 67,688
PSS World Medical, Inc. 2,000 41,500
Renal Care Group, Inc. 1,000 26,875
Total Renal Care Holdings, Inc. 1,000 26,563
VISX, Inc. 1,000 72,874
--------
422,437
--------
Hotels & Lodging - 0.3%
Hilton Hotels Corp. 1,000 21,750
--------
Insurance - 0.4%
Conseco, Inc. 1,000 33,125
--------
</TABLE>
See notes to financial statements.
<PAGE>
Puget Sound Market Neutral Portfolio
Schedule of Securities Sold Short- (continued)
November 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value
-------- ----------
<S> <C> <C>
Common Stocks - (continued)
Manufacturing-Consumer Goods - 0.6%
Danaher Corp. 1,000 $ 45,625
---------
Media - 3.1%
Chancellor Media Corp. 3,000 113,062
Comcast Corp.- Class A 1,000 48,625
Cox Communications, Inc.- Class A 1,000 52,688
Univision Communications, Inc.- Class A 1,000 28,000
---------
242,375
---------
Metals & Mining - 0.3%
Newmont Mining Corp. 1,000 19,875
---------
Oil & Gas - Exploration & Production Services - 5.3%
Bakers Hughes, Inc. 1,000 18,313
Newfield Exploration Co. 1,000 19,500
Noble Affiliates, Inc. 1,000 25,313
Pennzoil Co. 1,000 37,125
Royal Dutch Petroleum -NY Shares 4,000 187,999
Schlumberger Ltd. 2,000 89,374
Smith International, Inc. 1,000 24,125
Weatherford International 1,000 18,250
---------
419,999
---------
Packaging & Containers - 2.2%
Sealed Air Corp. 4,000 176,500
---------
Paper Products - 3.3%
Bowater, Inc 1,000 39,500
Champion International Corp. 1,000 41,563
Fort James Corp. 1,000 39,125
Georgia-Pacific Corp. 1,000 56,750
International Paper Co. 2,000 86,875
---------
263,813
---------
Pharmaceuticals - 4.4%
Forest Laboratories, Inc. 1,000 46,625
ICN Pharmaceuticals, Inc. 1,000 25,250
Eli Lilly & Co. 1,000 89,688
Medicis Pharmaceutical Corp.- Class A 1,000 63,000
Pfizer, Inc. 1,000 111,624
Twinlab Corp. 1,000 16,625
---------
352,812
---------
Photography - 0.5%
Polaroid Corp. 2,000 42,500
---------
</TABLE>
See notes to financial statements.
<PAGE>
Puget Sound Market Neutral Portfolio
Schedule of Securities Sold Short- (continued)
November 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value
------- ----------
<S> <C> <C>
Common Stocks - (continued)
Pipelines - 1.4%
Enron Corp. 1,000 $ 52,563
Williams Cos., Inc. 2,000 57,625
----------
110,188
----------
Professional Schools - 0.4%
Apollo Group, Inc.- Class A 1,000 32,250
----------
Retail - 3.3%
Abercrombie & Fitch Co.- Class A 3,000 168,000
Consolidated Stores Corp. 3,000 64,500
Saks, Inc. 1,000 27,500
----------
260,000
----------
Savings & Loans - 0.5%
Washington Mutual, Inc. 1,000 38,750
----------
Semiconductors - 2.5%
Applied Materials, Inc. 1,000 38,750
KLA-Tencor Corp. 3,000 102,188
PMC - Sierra, Inc. 1,000 53,875
----------
194,813
----------
Telecommunications - 9.3%
Airtouch Communications, Inc. 1,000 57,188
General Instrument Corp. 1,000 28,125
ICG Communications, Inc. 2,000 46,000
Lucent Technologies 3,000 258,187
Nextel Communications, Inc.- Class A 3,000 64,500
Northern Telecom Ltd. 1,000 46,688
Pacific Gateway Exchange, Inc. 1,000 44,750
Qwest Communications International, Inc. 3,000 119,999
Sprint Corp. 1,000 72,750
----------
738,187
----------
Textiles - 0.5%
Mohawk Industies, Inc. 1,000 37,313
----------
Transportation - 1.0%
Canadian National Railway Co. 1,000 54,000
Coach USA, Inc. 1,000 28,375
----------
82,375
----------
</TABLE>
See notes to financial statements.
<PAGE>
Puget Sound Market Neutral Portfolio
Schedule of Securities Sold Short- (continued)
November 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Value
-------- ---------
<S> <C> <C>
Common Stocks - (continued)
Waste Management - 1.3%
Allied Waste Industries, Inc. 3,000 $ 61,125
Waste Management, Inc. 1,000 42,875
-----------
104,000
-----------
Total Common Stocks (Cost $5,703,991) 6,321,388
-----------
Total Securities Sold Short (Cost $5,703,991) - 79.6% $6,321,388
==========
</TABLE>
____________
<PAGE>
Puget Sound Market Neutral Portfolio
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1998
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investments, at value (cost $7,071,390) $ 7,389,919
Deposits with brokers for securities sold short 6,769,221
Receivable from brokers for securities sold short 288,479
Interest and dividends receivable 18,504
Receivable for capital shares issued 871
Deferred organization costs 48,041
--------------------
Total Assets $ 14,515,035
Liabilities:
Securities sold short (Proceeds: $5,703,991) 6,321,388
Payable for capital shares redeemed 300
Payable for dividends on securities sold short 5,880
Payable for investments purchased 214,012
Investment advisory fees payable 19,169
Administration fees payable 1,883
Distribution and Service fees, Investor Shares 308
Other accrued expenses 11,753
--------------------
Total Liabilities 6,574,693
--------------------
Net Assets $ 7,940,342
====================
Net Assets consist of:
Capital $ 7,821,703
Accumulated net investment income 51,349
Accumulated undistributed net realized gains on investments and securities sold short 366,158
Net unrealized depreciation of investments and securities sold short (298,868)
--------------------
Total Net Assets $ 7,940,342
====================
Institutional Shares
Net Assets 7,838,697
Shares Outstanding 768,838
--------------------
Maximum Offering and Redemption price per share $10.20
Investor Shares
Net Assets 101,645
Shares Outstanding 9,990
--------------------
Net Asset Value- Redemption price per share $10.17
--------------------
Maximum Sales Charge 3.00%
--------------------
Maximum Offering Price (100%/(100%-maximum sales charge) of net asset value
adjusted to nearest cent.) $10.48
--------------------
</TABLE>
See notes to financial statements.
<PAGE>
Puget Sound Market Neutral Portfolio
STATEMENT OF OPERATIONS
For the period ended November 30, 1998*
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income:
Interest income $ 106,221
Dividend income 22,303
-----------------
$ 128,524
Expenses:
Investment advisory fees 42,512
Administration fees 3,188
Shareholder servicing fees- Investor Shares 154
12b-1 fees- Investor Shares 308
Fund accounting fees 10,629
Transfer agent fees 8,710
Custodian fees 12,098
Legal and audit fees 7,762
Printing fees 13,636
Dividend expense for securities sold short 30,741
Other fees 27,094
-----------------
Total expenses before waivers/ reimbursements 156,832
Less expenses waived (10,619)
Less expenses reimbursed by Investment Advisor (69,038)
-----------------
Net expenses 77,175
-----------------
Net Investment Income 51,349
-----------------
Realized and Unrealized Gains on Investments:
Net realized gains on investment transactions and securities sold short 366,158
Net change in unrealized depreciation of investments and securities sold short (298,868)
-----------------
Net realized and unrealized gains on investments 67,290
=================
Increase in Net Assets resulting from Operations $ 118,639
==================
</TABLE>
* Commencement of operations was June 29, 1998
See notes to financial statements.
<PAGE>
Puget Sound Market Neutral Portfolio
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
Ended
November 30, 1998(a)
----------------------
<S> <C>
From Investment Activities:
Operations:
Net investment income $ 51,349
Net realized gains on investment transactions and securities sold short 366,158
Net change in unrealized depreciation of investments and securities sold short (298,868)
------------------
Change in net assets resulting from operations 118,639
Capital Transactions:
Proceeds from shares issued 8,943,542
Cost of shares redeemed (1,221,839)
------------------
Change in net assets from share transactions 7,721,703
------------------
Change in net assets 7,840,342
Net Assets:
Beginning of period 100,000
------------------
End of period $ 7,940,342
==================
</TABLE>
(a) Commencement of operations was June 29, 1998
See notes to financial statements.
<PAGE>
Puget Sound Alternative Investment Series Trust
Notes to Financial Statements
November 30, 1998 (Unaudited)
________________________________________________________________________________
Note 1 -- Organization
Puget Sound Alternative Investment Series Trust (the "Trust") was organized as a
Massachusetts business trust on April 14, 1998 and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. As of the date of this report, the Trust offered
one managed investment portfolio, Puget Sound Market Neutral Portfolio (the
"Fund"). The Fund commenced operations on June 29, 1998.
Puget Sound Asset Management Co. LLC ("PSAM") serves as the investment adviser
of the Fund. The sub-adviser is Fiduciary Asset Management Co. ("FAMCO").
BISYS Fund Services Ohio, Inc.("BISYS"), a wholly-owned subsidiary of The BISYS
Group, Inc., acts as the Fund's administrator.
BISYS deposited $100,000 into the account of the Fund prior to the commencement
of operations.
The Fund's investment objective is to seek long-term capital appreciation while
maintaining minimal exposure to general equity market risk. The Fund seeks to
achieve its objective through a diversified portfolio using a non-traditional,
"market neutral" investment strategy.
Note 2 -- Significant Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
Securities Valuation
Equity securities held or sold short by the Fund are valued at the last
reported sales price on the securities exchange or in the principal over-the-
counter market in which such securities are traded, as of the close of
business on the day the securities are being valued. If there is no such
reported sale, the most recently quoted bid price is used for long securities
and the bid or mean of bid and ask price is used for securities sold short.
Repurchase Agreements
The Funds may purchase instruments from financial institutions, such as banks
and broker-dealers, subject to the seller's agreement to repurchase them at an
agreed upon time and price ("repurchase agreements"). The seller under a
repurchase agreement is required to maintain collateral for the value of the
securities subject to the agreement at not less than 102% of the repurchase
price. Default by the seller would, however, expose the relevant Funds to
possible loss because of adverse market action or delay in connection with the
disposition of the underlying obligations. Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase agreements.
Accordingly, the Funds could receive less than the carrying value upon the
sale of the underlying collateral securities .
Short Sales
The Fund is authorized to engage in short-selling of securities which obligate
the Fund to replace the security borrowed by purchasing the security at
current market value sometime in the future. The Fund will incur a loss if
the price of the security increases between the date of the short sale and the
date on which the fund replaces the borrowed security. The Fund will realize
a gain if the price of the security declines between those dates. During the
period ended November 30, 1998, the Fund incurred realized gains of $99,478
that are classified with net realized gains on investments. Until the Fund
replaces the borrowed security, the Fund will maintain a segregated account
with cash and/or U.S. Government Securities sufficient to cover its short
position on a daily basis. At November 30, 1998,
<PAGE>
Puget Sound Alternative Investment Series Trust
Notes to Financial Statements (Continued)
November 30, 1998 (Unaudited)
________________________________________________________________________________
the value of securities sold short in the Fund amounted to $6,321,388 against
which collateral of $6,769,220 was held. The collateral includes the Bear
Stearns Deposit Account.
Securities Transactions and Investment Income
Securities transactions are recorded on the trade date. Net realized gains and
losses on investments are recorded on the basis of identified cost. Interest
income is recorded on the accrual basis and includes, where applicable, the
amortization of premiums or accretion of discounts. Dividend income is
recorded on the ex-dividend date.
Expenses
The investment income and expenses of the Fund (other than class specific
expenses) and realized and unrealized gains and losses on investments of the
Fund are allocated to each class of shares based upon their relative net asset
value on the date income is earned or expenses are realized and unrealized
gains and losses are incurred.
Organization Costs
Costs incurred in connection with the organization and initial registration of
the Fund has been deferred and are being amortized over a sixty-month period,
beginning with the Fund's commencement of operations. In the event that any
of the initial shares are redeemed during such period by any holder thereof,
the related fund will be reimbursed by such holder for any unamortized
organization costs in the proportion as the number of initial shares being
redeemed bears to the number of initial shares outstanding at the time of
redemption.
Dividends to Shareholders
Dividends from the Fund's net investment income, if any, are declared and paid
annually. Net realized gains on portfolio securities, if any, are declared
and distributed at least annually. Dividends and distributions payable to
shareholders are recorded by the Fund on the ex-dividend date.
Dividends from net investment income and from net realized capital 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 reclassifications. 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 distribution of
capital.
Federal Income Taxes
It is the Fund's policy to comply with requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute timely,
all if its net investment company taxable income and net capital gains to
shareholders. Therefore, no federal income tax provision is required.
Expense Limitations
PSAM and the Trust have undertaken to limit the Fund's expenses to certain
annual levels. In subsequent years, overall operating expenses for the Fund
will not fall below the percentage limitation until PSAM has been fully
reimbursed for fees foregone and expenses paid by PSAM under this
<PAGE>
Puget Sound Alternative Investment Series Trust
Notes to Financial Statements (Continued)
November 30, 1998 (Unaudited)
________________________________________________________________________________
agreement, as the Fund will reimburse PSAM in subsequent years when operating
expenses (before reimbursement) are less than the applicable percentage
limitation.
The cumulative unreimbursed amount paid by PSAM on behalf of the Fund during
the period from inception to November 30, 1998 is $69,038.
Note 3 Related Party Transactions
The Trust has entered into an investment advisory agreement with PSAM. Under
the terms of the investment advisory agreement, PSAM is entitled to receive a
fee that is calculated daily and paid quarterly at the annual rate of 2.00% of
the average daily net assets of the Fund. PSAM has agreed to voluntarily reduce
the amount of its investment advisory fee and during the period ended November
30, 1998, waived fees of $10,465. PSAM, and not the Trust, pays FAMCO a fee
at the annual rate of 1.50% of the average daily net assets of the Fund for its
services under the sub-advisor contract.
BISYS serves as the administrator for the Trust pursuant to an administration
agreement. Under the administration agreement, BISYS is entitled to a fee that
is calculated daily and paid quarterly at an annual rate of 0.15% of the average
daily net assets of the Trust.
BISYS Fund Services, L.P., a wholly-owned subsidiary of The BISYS Group, Inc.
(the "Distributor") serves as the Trust's principal underwriter and distributor.
The Trust has adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940
Act with respect to Investor Shares. Under the Distribution Plan, the Trust
will pay the Distributor a fee that is calculated daily and paid quarterly at
the annual rate of 0.50% of the average daily net assets of the Investor Shares
of the Fund. The Distributor has agreed to voluntarily reduce the amount of its
fee and during the period ended November 30, 1998, waived fees of $154.
The Trust has also entered into a Shareholder Servicing Plan with the
Distributor for service provided to holders of Investor Shares. Pursuant to the
Shareholder Servicing Plan, the Trust will pay the Distributor a fee at an
annual rate up to 0.25% of the average daily net assets of the Investor Shares
of the Fund.
BISYS Fund Services, Inc., also a wholly-owned subsidiary of The BISYS Group,
Inc. serves as fund accountant and transfer and dividend disbursing agent of the
Fund.
Certain officers of the Trust are affiliated with PSAM or the Distributor and
its affiliates. Such persons are not paid directly by the Trust for serving in
those capacities.
Note 4 Shares of Beneficial Interest
The Fund offers two classes of shares: Institutional Shares and Investor
Shares. Each class is substantially the same, except that Investor Shares bear
the fees that are payable under the Trust's Distribution Plan and Shareholder
Servicing Plan, which relates only to the Investor Shares. All outstanding
Investor Shares were issued in connection with BISYS' deposit into the Fund
prior to commencement of operations. No additional activity in Investor Shares
occurred during the period ended November 30, 1998. The following is a summary
of transactions in Institutional Shares for the period ending November 30, 1998:
<TABLE>
<CAPTION>
CAPITAL TRANSACTIONS:
Shares Amount
----------------- ------------------
<S> <C> <C>
Institutional Shares:
Shares issued 792,383 $7,962,705
Shares redeemed (23,555) (241,002)
----------------- ------------------
Net increase 768,828 $7,721,703
================= ==================
</TABLE>
<PAGE>
Puget Sound Alternative Investment Series Trust
Notes to Financial Statements (Continued)
November 30, 1998 (Unaudited)
________________________________________________________________________________
Note 5 Investment Transactions
Purchases and sales of securities (excluding short-term securities) for the
period ended November 30, 1998 were as follows:
Purchases Sales
----------------------- ----------------
$36,425,916 $34,179,097
<PAGE>
Puget Sound Market Neutral Portfolio
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Investor Institutional
-------------------- -------------------
For the period ended For the period ended
November 30, 1998(a) November 30, 1998(a)
(Unaudited) (Unaudited)
- ----------------------------------------------------------------------------------------------- -------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 10.00 $ 10.00
-------------------- -------------------
Net investment income 0.11 0.10
Net realized and unrealized gain 0.06 0.10
-------------------- -------------------
Total income from investment operations 0.17 0.20
-------------------- -------------------
Net Asset Value, End of Period $ 10.17 $ 10.20
==================== ===================
Total Return (excluding sales charge) 1.70%(b) 2.00%(b)
Ratios to Average Net Assets, and Supplemental Data:
Net assets at end of period (000) $ 101 $ 7,839
Net expenses (excluding dividend expense) 2.62%(c) 2.17%(c)
Net expenses (including dividend expense) 3.89%(c) 3.62%(c)
Gross expense (excluding dividend expense)* 6.68%(c) 5.91%(c)
Gross expense (including dividend expense)* 7.95%(c) 7.36%(c)
Net Investment Income (including dividend expense) 2.82%(c) 2.40%(c)
Portfolio Turnover Rate (d) 340.75%(b) 340.75%(b)
</TABLE>
____________________
* During the period, certain fees were voluntarily reduced and/ or
reimbursed. If such voluntary fee reductions and/ or reimbursements had
not occurred, the ratio would have been as indicated.
(a) Commencement of the Portfolio was June 29, 1998
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
<PAGE>
Investment Advisor
Puget Sound Asset Management Co., LLC
One Yesler Building, Suite 200
Seattle, Washington 98104
Distributor
BISYS Funds Services, L.P.
3435 Stelzer Road
Columbus, OH 43219
Transfer Agent
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, OH 43219
Independent Auditors
Deloitte & Touche LLP
50 Fremont Street
San Francisco, California 94105
Custodian
Custodial Trust Company
101 Carnegie Center
Princeton, New Jersey 08540
Legal Counsel
Ropes & Gray
One International Place
Boston, Massachusetts 02110
This report is submitted for the general information of the shareholders of the
Puget Sound Market Neutral Portfolio. It is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
1/99
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