[PUGET SOUND ALTERNATIVE INVESTMENT SERIES TRUST LOGO]
PUGET SOUND MARKET NEUTRAL PORTFOLIO
SEMI-ANNUAL REPORT
NOVEMBER 30, 1999
POST OFFICE BOX 219407
KANSAS CITY, MO 64121-9407
TOLL FREE (877) 777-8438
<PAGE>
November 30, 1999
Dear Fellow Shareholder,
As we close 1999 and begin the year 2000, we are pleased to present this
semi-annual report for the six-month period ended November 30, 1999. The
Institutional Shares of the PUGET SOUND MARKET NEUTRAL PORTFOLIO returned 11.48%
during the period, which compares quite favorably to the 90-day T-bill return of
2.39%. From the Fund's inception, our goal has been to provide returns that
outperform the "risk-free rate" by approximately 6%, as measured by the 90-day
T-bill. During the latest fiscal period, the Fund exceeded this goal. The Fund
also exceeded the intermediate bond return of 1.38%, as measured by the Lehman
Government/Corporate Intermediate Bond Index. Coming off an extended period when
many market neutral funds have not performed well, we are also very pleased with
the performance of the PUGET SOUND MARKET NEUTRAL PORTFOLIO relative to its
peers.
At the end of November 1999, your portfolio had a positive bias toward
securities of large capitalization companies and momentum stocks. It also had a
slight bias toward securities of growth companies, including technology
companies. The Fund was negatively biased against leverage (companies with high
debt) and currency sensitivity (companies with high overseas revenues). During
the last several months, the Fund's portfolio manager John Dorian has
incorporated an enhancement to his investment approach--a sector relative model.
We believe that, over the long run, this change to his model will add value to
the portfolio.
Looking ahead to the year 2000, we do not know whether this present period of
market volatility and unusual valuation trends will persist. We do believe that
a market neutral strategy makes sense in either market environment--positive or
negative. However, we view the last six months--and indeed all of 1999--as
extraordinary times. Topics such as stock market valuation, the Internet
phenomenon, and IPO mania dominate investors' discussions.
Some interesting facts for you to ponder about the final year of this century:
* Just 1% of the 400 companies in the Internet sector account for 40% of
its $900 billion value in the stock market.
* The average value of an Internet company is approximately $500
million, yet the median value is just $53 million.
* In 1999, the largest domestic offering in history, the $5.47 billion
United Parcel Services, Inc. deal, was not a "dot com" company.
* Pure Internet companies that went public in 1999 rose, on average,
233% above their offering price.
* Seventy-three percent of new issues this year had no earnings, though
these stocks generated average returns of 224% over their offering
prices for the year. Contrast this with the performance of companies
with profits--an average return of 90%.
We would like to thank you for your continued support. We appreciate your
confidence and look forward to further serving your needs in the area of
non-traditional investments.
Best wishes for a healthy and prosperous 2000.
Sincerely,
Margaret M. Towle, Chairperson
Puget Sound Alternative Investment Series Trust
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Schedule of Portfolio Investments
November 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCKS - 77.3%
AEROSPACE/DEFENSE - 2.3%
General Dynamics Corp. 2,000 $ 103,125
Northrop Grumman Corp. 3,000 168,563
Teledyne Technologies, Inc. * 571 5,035
United Technologies Corp. 4,000 226,000
-----------
502,723
-----------
AUTO MANUFACTURERS - 2.1%
Ford Motor Company 4,000 202,000
General Motors Corp. 1,000 72,000
Navistar International Corp., Inc. 3,000 111,562
Paccar, Inc. 2,000 82,250
-----------
467,812
-----------
AUTO PARTS & EQUIPMENT - 1.2%
Cooper Tire & Rubber Company 8,000 120,000
Magana International, Inc. 2,000 87,375
Meritor Automotive, Inc. 3,000 51,375
-----------
258,750
-----------
BANKS - 1.8%
Amsouth Bancorporation 2,000 45,125
Bank One Corp. 3,000 105,750
CCB Financial Corp. 3,000 130,125
Firstar Corp. 1,000 26,000
Hibernia Corp. 3,000 38,062
Hudson United Bancorp 1,030 31,801
Regions Financial Corp. 1,000 27,437
-----------
404,300
-----------
BEVERAGES - 0.7%
Anheuser Busch Companies, Inc. 2,000 149,625
-----------
BIOTECHNOLOGY - 3.0%
Affymetrix, Inc.* 3,000 294,000
Enzon, Inc.* 3,000 101,250
Idec Pharmaceuticals Corp. * 1,000 126,750
Immunex Corp. * 2,000 141,750
-----------
663,750
-----------
BUILDING MATERIALS - 0.4%
Rayonier, Inc. 2,000 88,875
-----------
CHEMICALS - 1.0%
Ashland, Inc. 3,000 101,250
Rohm & Hass Company 3,000 109,875
-----------
211,125
-----------
See Notes to Financial Statements
3
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Schedule of Portfolio Investments (continued)
November 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCKS - (CONTINUED)
COMMERCIAL SERVICES - 2.1%
Convergys Corp.* 2,000 $ 54,625
Gartner Group, Inc.* 4,000 46,000
Manpower, Inc. 1,000 36,437
Medquist, Inc. * 1,000 28,500
Modis Professional Services, Inc.* 3,000 32,062
Paychex, Inc. 3,000 119,812
Profit Recovery Group International, Inc.* 1,000 37,046
Startek, Inc.* 1,000 22,937
Valassis Communications, Inc. 2,000 78,750
-----------
456,169
-----------
COMPUTERS - 4.5%
Adaptec, Inc. * 1,000 53,875
Ceridian Corp. 4,000 86,500
Cisco Systems, Inc. * 1,000 89,187
Electronic Data Systems Corp. 2,000 128,625
International Business Machines 1,000 103,062
Sapient Corp. * 1,000 77,500
Sun Microsystems, Inc. * 2,000 264,500
Veritas Software Corp. * 1,500 137,343
Whittman Hart, Inc. * 1,000 61,437
-----------
1,002,029
-----------
COSMETICS/PERSONAL CARE - 0.3%
Kimberly-Clark Corp. 1,000 63,875
-----------
DISTRIBUTION/WHOLESALE - 0.5%
Genuine Parts Company 4,000 103,000
-----------
DIVERSIFIED FINANCIAL SERVICES - 1.2%
Federal National Mortgage Association 4,000 266,500
-----------
ELECTRIC - 2.7%
Citizens Utilities Company 4,000 49,500
Covectiv, Inc. 5,000 88,125
DTE Energy Company 5,000 165,312
Duke Energy Company 1,000 50,687
Firstenergy Corp. 4,000 93,250
Peco Energy Company 1,000 32,937
PG&E Corp. 1,000 22,375
Teco Energy, Inc. 5,000 100,000
-----------
602,186
-----------
ELECTRONIC COMPONENTS - 2.0%
Arrow Electronics, Inc. 3,000 68,625
Credence Systems Corp.* 1,000 57,937
Johnson Controls, Inc. 1,000 54,500
Kemet Corp.* 1,000 36,250
See Notes to Financial Statements
4
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Schedule of Portfolio Investments (continued)
November 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCKS - (CONTINUED)
ELECTRONIC COMPONENTS - CONTINUED
Solectron Corp.* 2,000 $ 164,750
Vishay Intertechnology, Inc.* 2,000 57,875
-----------
439,937
-----------
FOOD - 0.5%
Bestfoods 1,000 54,812
Hershey Foods Corp. 1,000 49,125
Supervalu, Inc. 1,000 19,437
-----------
123,374
-----------
FOREST PRODUCTS & PAPER - 0.2%
Lousiana Pac Corp. 4,000 49,000
-----------
GAS - 0.2%
Keyspan Corp. 2,000 51,375
-----------
HAND/MACHINE TOOLS - 0.2%
W.W. Grainger, Inc. 1,000 47,125
-----------
HEALTH CARE - 3.4%
Becton Dickinson & Company 4,000 109,000
C.R. Bard, Inc. 5,000 271,562
Mallinckrodt, Inc. 1,000 33,250
Summit Technology, Inc.* 4,000 76,750
Varian Medical Systems, Inc. 1,000 26,125
Visx, Inc.* 3,000 232,687
-----------
749,374
-----------
HOME BUILDERS - 0.5%
Centex Corp. 3,000 71,250
Clayton Homes, Inc. 3,000 30,562
-----------
101,812
-----------
HOME FURNISHINGS - 0.5%
Leggett & Platt, Inc. 2,000 42,875
Water Pik Tech, Inc.* 200 1,475
Whirlpool Corp. 1,000 61,000
-----------
105,350
-----------
INSURANCE - 2.4%
Aetna, Inc. 3,000 163,875
Conseco, Inc. 3,000 60,750
Everest Reinsurance Holdings 5,000 118,750
Loews Corp. 1,000 64,000
Old Rep International Corp. 10,000 125,000
-----------
532,375
-----------
IRON/STEEL - 0.2%
Allegheny Technologies, Inc. 2,000 50,375
See Notes to Financial Statements
5
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Schedule of Portfolio Investments (continued)
November 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCKS - (CONTINUED)
MACHINERY-DIVERSIFIED - 0.2%
Imation Corp. * 1,000 $ 32,187
-----------
MEDIA - 5.0%
AT&T Corp. * 1,000 41,813
Belo A H Corp. 5,000 90,000
Cablevision Systems Corp,* 1,000 68,563
Clear Channel Communications* 10,000 803,750
Comcast Corp. 1,000 45,188
Cox Communications, Inc.* 1,000 47,000
-----------
1,096,314
-----------
MISCELLANEOUS MANUFACTURER - 5.7%
Eastman Kodak Company 5,000 309,375
Minnesota Mining & Manufacturing Company 7,000 668,938
Textron, Inc. 4,000 284,250
-----------
1,262,563
-----------
OFFICE FURNISHINGS - 0.1%
Miller Herman, Inc. 1,000 22,875
-----------
OIL & GAS PRODUCERS - 2.5%
Exxon Corp. 3,000 237,938
Newfield Explore Company* 3,000 77,438
Royal Dutch Pete Company 3,000 174,000
Vastar Resources, Inc. 1,000 56,000
-----------
545,376
-----------
OIL & GAS SERVICES - 1.0%
BJ Services Company* 1,000 34,875
Schlumberger, Ltd. 3,000 180,188
-----------
215,063
-----------
PACKAGING & CONTAINERS - 0.1%
Bemis, Inc. 1,000 31,500
-----------
PHARMACEUTICALS - 3.4%
Andrx Corp.* 3,000 154,500
Astrazeneca Plc 1,000 44,500
Ivax Corp. 3,000 60,938
Medimmune, Inc.* 1,000 120,188
Merck & Company, Inc. 4,000 314,000
Schering Plough Corp. 1,000 51,125
-----------
745,251
-----------
RETAIL - 1.3%
Circuit City Stores, Inc. 3,000 145,500
Payless Shoesource, Inc.* 3,000 137,438
See Notes to Financial Statements
6
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Schedule of Portfolio Investments (continued)
November 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCKS - (CONTINUED)
RETAIL - CONTINUED
Ross Stores, Inc. 1,000 $ 19,188
-----------
302,126
-----------
SEMICONDUCTORS - 3.3%
Alpha Industries, Inc. 1,000 60,500
Cypress Semiconductor Corp.* 1,000 27,250
Dallas Semiconductor Corp. 1,000 57,688
International Rectifier Corp.* 1,000 20,250
LSI Logic Corp. * 1,000 60,438
National Semiconductor Corp.* 1,000 42,500
PMC Sierra, Inc. * 3,000 309,188
SDL, Inc. * 1,000 162,750
-----------
740,564
-----------
SOFTWARE - 7.8%
Adobe System, Inc. 1,000 68,687
Bea Systems, Inc.* 1,000 81,250
BMC Software, Inc.* 1,000 72,813
Cnet, Inc. * 2,000 101,875
Concentric Network Corp.* 3,000 85,313
IMS Health, Inc. 3,000 70,688
Informix Corp. * 1,000 11,000
Microsoft Corp.* 2,000 182,094
Real Networks, Inc.* 3,000 418,500
S1 Corp. * 3,000 144,750
Verio, Inc. * 2,000 71,875
Yahoo, Inc.* 2,000 425,500
-----------
1,734,345
-----------
TELECOMMUNICATION EQUIPMENT - 5.7%
Harmonic, Inc.* 7,000 420,875
Lucent Technologies, Inc. 1,000 73,063
Powerwave Technologies, Inc.* 1,000 59,813
Qualcomm, Inc.* 2,000 724,625
-----------
1,278,376
-----------
TELECOMMUNICATIONS - 1.3%
Echostar Communications Corp.* 1,000 66,063
Panamsat Corp.* 1,000 42,563
Price Communications Corp.* 4,000 100,250
RCN Corp. * 2,000 90,250
-----------
299,126
-----------
TELEPHONE - 4.4%
Alltel Corp. 1,000 86,500
Bell Atlantic Corp. 1,000 63,313
Centurytel, Inc. 10,000 460,000
SBC Communications, Inc. 7,000 363,563
-----------
973,376
-----------
See Notes to Financial Statements
7
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Schedule of Portfolio Investments (continued)
November 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
SHARES
OR PRINCIPAL VALUE
------------ -----
COMMON STOCKS - (CONTINUED)
TOBACCO - 0.8%
Philip Morris Companies, Inc. 7,000 $ 184,188
-----------
TRANSPORTATION - 0.8%
CSX Corp. 5,000 177,813
-----------
TOTAL COMMON STOCKS (COST $16,135,062) (A) 17,131,859
-----------
REPURCHASE AGREEMENT - 21.0%
Bear Stearns Repurchase Agreement,
5.65%, dated 11/30/99, due 12/1/99,
collaterialized by $4,670,000
U.S Treasury Notes, 6.50%, due 10/15/06,
value $4,763,472
(proceeds $4,669,823) (cost $4,669,090) $ 4,669,090 4,669,090
-----------
TOTAL REPURCHASE AGREEMENT
(COST $4,669,090) (a) 4,669,090
-----------
TOTAL INVESTMENTS AND
REPURCHASE AGREEMENTS
(COST $20,804,152) (a)-98.3% 21,800,949
-----------
DEPOSITS WITH BROKERS FOR
SECURITIES SOLD SHORT - 80.0%
Bear Stearns Margin Account $ 17,724,893 17,724,893
-----------
TOTAL DEPOSITS WITH BROKERS FOR
SECURITIES SOLD SHORT
(COST $17,724,893) 17,724,893
-----------
SECURITIES SOLD SHORT (PROCEEDS $16,944,356)
(a)-(77.6) (17,198,588)
-----------
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.7%) (163,105)
-----------
TOTAL NET ASSETS - 100.0% $22,164,149
===========
- ----------
* Non-income producing security
(a) At November 30, 1999, the basis of investments and short sales for federal
income tax purposes was the same as their cost for financial reporting
purposes. Unrealized appreciation and depreciation of investments and short
sales were as follows:
Unrealized appreciation - Investments $ 1,656,549
Unrealized appreciation - Short Sales 1,597,522
Unrealized depreciation - Investments (659,752)
Unrealized depreciation - Short Sales (1,851,754)
------------
Net unrealized appreciation $ 742,565
============
See Notes to Financial Statements
8
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Schedule of Securities Sold Short
November 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCKS
AEROSPACE/DEFENSE - 0.4%
Cordant Technologies, Inc. 2,000 $ 58,250
Goodrich B.F. Company 1,000 22,563
-----------
80,813
-----------
AIRLINES - 1.0%
Northwest Airlines Corp. 9,000 210,937
-----------
APPAREL - 2.1%
Jones Apparel Group, Inc. 4,000 106,750
Nike, Inc. 5,000 230,000
Tommy Hilfiger Corp. 5,000 123,125
-----------
459,875
-----------
AUTO PARTS & EQUIPMENT - 1.1%
Federal Mogul Corp. 11,000 245,437
-----------
BIOTECHNOLOGY - 2.9%
Genzyme Corp. 4,000 144,000
Monzanto Company 12,000 506,250
-----------
650,250
-----------
BUILDING MATERIALS - 0.9%
American Std Companies, Inc. 2,000 77,875
Martin Marietta Materials, Inc. 3,000 113,813
-----------
191,688
-----------
COMMERCIAL SERVICES - 4.0%
Apollo Group, Inc. 6,000 161,250
McKesson Hboc, Inc. 8,000 187,000
Medical Manager Corp. 1,000 60,562
Nova Corp. GA 3,000 91,875
Quanta Services, Inc. 2,000 56,000
Quintiles Transnational Corp. 5,000 110,312
Robert Half International, Inc. 2,000 56,000
US Web Corp. 4,000 165,750
-----------
888,749
-----------
COMPUTERS - 5.2%
3COM Corp. 9,000 358,312
Apple Computer 1,000 97,875
Compaq Computer Corp. 10,000 244,375
Dell Computer Corp. 1,000 43,000
Eletronics For Imaging, Inc. 1,000 44,563
NCR Corp. 5,000 164,063
Seagate Technology 2,000 74,000
Visual Networks, Inc. 2,000 118,000
-----------
1,144,188
-----------
See Notes to Financial Statements
9
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Schedule of Securities Sold Short (continued)
November 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCKS - (CONTINUED)
COSMETICS/PERSONAL CARE - 0.4%
Estee Lauder Componies, Inc. 2,000 $ 84,375
-----------
DISTRIBUTION/WHOLESALE - 2.5%
Costco Wholesale Corp. 5,000 458,438
Tech Data Corp. 4,000 98,000
-----------
556,438
-----------
ELECTRIC - 1.9%
AES Corp. 1,000 57,938
Allegheny Energy, Inc. 4,000 116,000
Ameren Corp. 3,100 107,338
Dominion Resources, Inc. 1,000 45,375
Montana Power Company 3,000 92,625
-----------
419,276
-----------
ELECTRICAL COMPONENTS & EQUIPMENT - 0.2%
American Power Conversion Corp. 2,000 47,625
-----------
ELECTRONICS - 1.0%
Cymer, Inc. 3,000 120,000
Sanmina Corp. 1,000 96,125
-----------
216,125
-----------
ENTERTAINMENT - 1.0%
Premier Paks, Inc. 3,000 75,000
SFX Entertainment, Inc. 4,000 135,000
-----------
210,000
-----------
FOOD - 1.9%
Great Atlantic & Pac Tea, Inc. 1,000 25,438
Kroger Company 3,000 63,938
Quaker Oats Company 4,000 261,000
Sara Lee Corp. 1,000 24,250
Suiza Foods Corp. 1,000 35,938
-----------
410,564
-----------
FOREST PRODUCTS & PAPER - 1.8%
Bowater, Inc. 2,000 98,000
Chamption International Corp. 4,000 221,750
Georgia Pac Corp. 2,000 79,625
-----------
399,375
-----------
HAND/MACHINE TOOLS - 2.6%
Black & Decker Corp. 3,000 134,625
SPX Corp. 6,000 447,000
-----------
581,625
-----------
See Notes to Financial Statements
10
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Schedule of Securities Sold Short (continued)
November 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCKS - (CONTINUED)
HEALTH CARE - 2.4%
Bausch & Lomb, Inc. 3,000 $ 164,438
Boston Scientific Corp. 8,000 169,000
Lincare Holdings, Inc. 1,000 28,375
Tenet Healthcare Corp. 3,000 66,938
United Heatlthcare Corp. 1,000 51,938
Wellpoint Health Networks, Inc. 1,000 57,563
-----------
538,252
-----------
HOLDING COMPANIES-DIVERS - 1.4%
Seagram Ltd. 7,000 304,938
-----------
HOME BUILDERS - 0.2%
Kaufman & Broad Home Corp. 2,000 44,250
-----------
HOUSEHOLD PRODUCTS/WARES - 2.1%
Clorox Company 10,000 445,625
Dial Corp. 1,000 28,063
-----------
473,688
-----------
INSURANCE - 0.3%
Magic INVT CORP WIS 1,000 56,500
-----------
LODGING - 0.4%
Marriott International, Inc. 2,000 65,125
Starwood Hotels & Resorts 1,000 22,313
-----------
87,438
-----------
MACHINERY-CONSTRUCTION & MINING - 0.3%
Terex Corp. 2,000 56,000
-----------
MEDIA - 0.9%
Disney Walt Company 3,000 83,625
Dow Jones & Company, Inc. 1,000 60,625
Readers Digest Association, Inc. 2,000 58,000
-----------
202,250
-----------
METALS-DIVERSIFIED - 1.5%
Alcan Alum Ltd. 3,000 102,000
Phelps Dodge Corp. 4,000 208,000
Stillwater Mining Company 1,000 24,250
-----------
334,250
-----------
MINING - 0.5%
Newmont Mining Corp. 5,000 118,437
-----------
See Notes to Financial Statements
11
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Schedule of Securities Sold Short (continued)
November 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCKS - (CONTINUED)
MISCELLANEOUS MANUFACTURER - 2.9%
Corning, Inc. 3,000 $ 281,063
Pall Corp. 2,000 46,875
Polaroid Corp. 6,000 115,500
Tyco International Ltd. 5,000 200,312
-----------
643,750
-----------
OIL & GAS PRODUCERS - 2.4%
Amerada Hess Corp. 4,000 231,750
Apache Corp. 2,000 71,625
Kerr McGee Corp. 3,000 171,750
Tosco Corp. 1,000 27,062
Ultramar Diamond Shamrock 1,000 25,312
-----------
527,499
-----------
OIL & GAS SERVICES - 2.1%
Cooper Cameron Corp. 2,000 85,750
Halliburton Company 8,000 309,500
Weatherford International, Inc. 2,000 69,875
-----------
465,125
-----------
PACKAGING & CONTAINERS - 1.0%
Sealed Air Corp. 3,000 141,000
Smurfit Stone Container Corp. 4,000 76,750
-----------
217,750
-----------
PHARMACEUTICALS - 3.5%
Alkermes, Inc. 1,000 42,500
ICN Pharmaceuticals, Inc. 4,000 97,250
Medicis Pharmaceutical Corp. 1,000 35,125
Sepracor, Inc. 5,000 485,625
Watson Pharmaceuticals, Inc. 3,000 111,562
-----------
772,062
-----------
PIPELINES - 2.1%
El Paso Energy Corp. 2,000 77,000
Kinder Morgan, Inc. 2,000 40,625
WIlliams Companies, Inc. 10,000 337,500
-----------
455,125
-----------
RETAIL - 7.7%
Abercrombie And Fitch Company 1,000 32,375
Amazon Company, Inc. 3,000 255,187
Anntaylor Stores Corp. 2,000 86,375
Best Buy Company, Inc. 1,000 62,500
CEC Entertainment, Inc. 4,500 135,000
Federated Department Stores, Inc. 2,000 94,125
Jack In The Box, Inc. 3,000 63,187
Kohls Corp. 2,000 144,375
Linens N' Things, Inc. 2,000 67,500
See Notes to Financial Statements
12
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Schedule of Securities Sold Short (continued)
November 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCKS - (CONTINUED)
RETAIL - CONTINUED
McDonalds Corp. 1,000 $ 45,000
Starbucks Corp. 8,000 212,500
Tricon Global Restaurants, Inc. 2,000 83,000
Wendy's International, Inc. 2,000 44,125
Williams Sonoma, Inc. 5,000 272,500
Zale Corp. 2,000 101,250
-----------
1,698,999
-----------
SAVINGS & LOANS - 0.6%
Astoria Financial Corp. 2,000 63,062
Greenpoint Financial Corp. 2,000 50,625
Netbank, Inc. 1,000 23,750
-----------
137,437
-----------
SHIPBUILDING - 0.3%
Newport News Shipbuilding, Inc. 2,000 66,000
-----------
SOFTWARE - 4.6%
24 / 7 Media, Inc. 3,000 152,250
At Home Corp. 1,000 48,500
CMG Information Services, Inc. 1,000 147,312
Lycos, Inc. 4,000 224,000
Macromedia, Inc. 4,000 263,000
New Era Of Networks, Inc. 4,000 192,500
Transaction System Architects, Inc. 2,000 69,875
-----------
1,097,437
-----------
TELECOMMUNICATION EQUIPMENT - 3.6%
ADC Telecommunications, Inc. 2,000 106,625
Ciena Corp. 1,000 43,937
Commscope, Inc. 5,000 210,625
Harris Corp. 1,000 21,000
Motorola, Inc. 3,000 342,750
Plantronics, Inc. 1,000 63,000
-----------
787,937
-----------
TELECOMMUNICATIONS - 4.1%
Broadwing, Inc. 2,000 58,250
General Motors Corp. 6,000 513,750
Mcleodusa, Inc. 2,000 86,000
Winstar Communications, Inc. 5,000 253,750
-----------
911,750
-----------
TELEPHONE - 0.4%
Viatel, Inc. 2,000 84,000
-----------
TEXTILES - 0.2%
Mohawk Industries, Inc. 2,000 49,875
-----------
See Notes to Financial Statements
13
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Schedule of Securities Sold Short (continued)
November 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCKS - (CONTINUED)
TOYS/GAMES/HOBBIES - 0.3%
Hasbro, Inc. 3,000 $ 64,687
-----------
TRANSPORTATION - 0.8%
Kansas City Southern Industries, Inc. 2,000 119,125
Norfolk Southern Corp. 3,000 64,125
-----------
183,250
-----------
TRUCKING & LEASING - 0.1%
Ryder Systems, Inc. 1,000 22,562
-----------
TOTAL COMMON STOCKS (PROCEEDS $16,944,356) 17,198,588
-----------
TOTAL SECURITIES SOLD SHORT (PROCEEDS $16,944,356) - 77.6% $17,198,588
===========
Percentages indicated are based on net assets of $22,164,149
See Notes to Financial Statements
14
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1999
(Unaudited)
ASSETS:
Investments, at value (cost $16,135,062) $ 17,131,859
Repurchase agreement, at cost 4,669,090
Deposits with brokers for securities sold short 17,724,893
Receivables:
Interest and dividends 61,987
From brokers for securities sold 1,200,116
Fund shares sold 2,640
Prepaid expenses and other assets 23,478
Deferred organization costs 62,352
------------
Total Assets 40,876,415
------------
LIABILITIES:
Securities sold short (Proceeds: $16,944,356) 17,198,588
Payable for dividends on securities sold short 12,731
Payable for investments purchased 1,433,755
Investment advisory fees payable 28,443
Administration fees payable 2,854
Distribution and service fees, Investor Shares 3,133
Other accrued expenses 32,762
------------
Total Liabilities 18,712,266
------------
NET ASSETS $ 22,164,149
============
NET ASSETS CONSIST OF:
Capital $ 22,848,507
Accumulated net investment income 800,003
Accumulated net realized loss on investments
and securities sold short (2,226,926)
Net unrealized appreciation of investments
and securities sold short 742,565
------------
TOTAL NET ASSETS $ 22,164,149
============
INSTITUTIONAL SHARES
Net Assets $ 17,000,462
Shares Outstanding 1,667,306
------------
Net Asset Value, Maximum Offering and
Redemption price per share $ 10.20
============
INVESTOR SHARES
Net Assets $ 5,163,687
Shares Outstanding 509,763
------------
Net Asset Value and Redemption price per share $ 10.13
------------
Maximum Sales Charge 3.00%
------------
Maximum Offering Price (100%/(100%-maximum sales charge)
of net asset value adjusted to nearest cent) $ 10.44
============
See Notes to Financial Statements
15
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
STATEMENT OF OPERATIONS
For the Six Months Ended November 30, 1999
(Unaudited)
INVESTMENT INCOME:
Interest income $ 590,513
Dividend income
(net of foreign withholding tax of $210) 105,596
----------
696,109
----------
EXPENSES:
Investment advisory fees 231,912
Transfer agent fees 23,647
Registration and filing fees 22,512
Fund accounting fees 19,850
Administration fees 17,569
Audit fees 15,611
12b-1 fees - Investor Shares 13,382
Amortization of organization costs 8,711
Shareholder servicing fees - Investor Shares 6,691
Trustees fees 3,700
Legal fees 3,300
Custodian fees 2,700
Printing fees 2,500
Other fees 29,142
----------
Total expenses before waivers/reimbursements 401,227
Less 12b-1 fees waived (6,691)
Less expenses reimbursed by Investment Advisor (129,529)
----------
Total expenses after waivers/reimbursements 265,007
Plus dividend expense for securities sold short 78,943
----------
Net expenses 343,950
----------
NET INVESTMENT INCOME 352,159
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investment transactions and
securities sold short 693,413
Net change in unrealized depreciation of
investments and securities sold short 1,441,776
----------
Net realized and unrealized gain on
investments and securities sold short 2,135,189
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,487,348
==========
See Notes to Financial Statements
16
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
THE SIX MONTHS FOR THE PERIOD
ENDED ENDED
11/30/99 05/31/99(a)
UNAUDITED)
------------ ------------
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 352,159 $ 491,774
Net realized gain (loss) on investment
transactions and securities sold short 693,413 (2,654,172)
Net change in unrealized appreciation
(depreciation) of investments and
securities sold short 1,441,776 (699,211)
------------ ------------
Change in net assets resulting
from operations 2,487,348 (2,861,609)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (106,553)
From realized gains -- (203,544)
------------ ------------
Change in net assets from
shareholder transactions -- (310,097)
------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 1,998,353 63,936,895
Distributions reinvested -- 233,015
Cost of shares redeemed (11,934,920) (31,484,836)
------------ ------------
Change in net assets from
share transactions (9,936,567) 32,685,074
------------ ------------
Change in net assets (7,449,219) 29,513,368
NET ASSETS:
Beginning of period 29,613,368 100,000
------------ ------------
End of period $ 22,164,149 $ 29,613,368
============ ============
Accumulated net investment income $ 800,003 $ 447,844
============ ============
- ----------
(a) Commencement of operations was June 29, 1998.
See Notes to Financial Statements
17
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INVESTOR INVESTOR
------------- ------------- -------- --------
FOR THE SIX FOR THE PERIOD FOR THE SIX FOR THE PERIOD
MONTHS ENDED ENDED MONTHS ENDED ENDED
11/30/1999 5/31/1999(a) 11/30/1999 5/31/1999(a)
------------- ------------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.15 $10.00 $ 9.12 $10.00
------- ------ ------ ------
Net investment income $ 0.15# $ 0.18 $ 0.12# $0.16
Net realized and
unrealized gain (loss) $ 0.90 ($0.73) $ 0.89 ($0.74)
------ ------ ------ ------
Total income from
investment operations $ 1.05 ($0.55) $ 1.01 ($0.58)
------ ------ ------ ------
Less Distributions From:
Net investment income -- ($0.04) -- ($0.04)
Realized gains -- ($0.26) -- ($0.26)
------ ------ ------ ------
Total distributions -- ($0.30) -- ($0.30)
------ ------ ------ ------
Net change in net asset
value per share $ 1.05 ($0.85) $ 1.01 ($0.88)
------ ------ ------ ------
Net Asset Value, End of Period $10.20 $ 9.15 $10.13 $9.12
====== ====== ====== ======
Total Return (excluding sales charge) (b) 11.48% (5.76%) 11.07% (6.07%)
Ratios to Average Net Assets and
Supplemental Data: (c)
Net assets at end of period (000) $17,000 $20,959 $5,164 $8,654
Net expenses
(excluding dividend expense) 2.17% 2.17% 2.67% 2.67%
Net expenses
(including dividend expense) 2.85% 3.05% 3.35% 3.37%
Gross expense*
(excluding dividend expense) 3.29% 3.71% 4.04% 4.45%
Gross expense*
(including dividend expense) 3.97% 4.58% 4.72% 5.16%
Net Investment Income
(including dividend expense) 3.15% 2.57% 2.65% 2.07%
Portfolio Turnover Rate (d) 217.87% 630.18% 217.87% 630.18%
</TABLE>
- ----------
* During the periods, indicated certain fees were reduced and/or reimbursed.
If such fee reductions and/or reimbursements had not occurred, the actual
expenses incurred by the Fund as a percentage of average net assets would
have been as shown.
# Per share numbers have been calculated using the average share method.
(a) Commencement of operations was June 29, 1998.
(b) Not annualized.
(c) Ratios are annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares. Percentages indicated
take into account only the long transactions (i.e. they exclude short
sales).
18
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Notes to Financial Statements
November 30, 1999
(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 offers
one managed investment portfolio, Puget Sound Market Neutral Portfolio (the
"Fund"). The Fund commenced operations on June 29, 1998. The Fund offers
Institutional Shares and Investor Shares. Each class is substantially the same
except Investor Shares are sold with a sales charge and bear the fees that are
payable under the Trust's Distribution Plan and Shareholder Servicing Plan,
which relate only to the Investor Shares.
Puget Sound Asset Management Co., LLC ("PSAM") serves as the investment advisor
("Advisor") of the Fund. The sub-advisor is Fiduciary Asset Management Co.
("FAMCO").
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 its 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 principal securities exchange or
over-the-counter market in which such securities are traded 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 for securities
sold short.
REPURCHASE AGREEMENTS
The Fund 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 Fund
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 Fund could receive less than the
carrying value upon the sale of the underlying collateral securities.
SHORT SALES
The Fund is authorized to engage in the short selling of securities. Short
selling obligates the Fund to replace borrowed securities by purchasing
them some time in the future at the then current market value. These
transactions result in off-balance-sheet risk (i.e. the risk that the
ultimate obligation may exceed the amount shown in the accompanying
statement of assets and liabilities). The Fund will incur a loss if the
19
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Notes to Financial Statements (Continued)
November 30, 1999
(Unaudited)
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.
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, 1999, the
value of securities sold short amounted to $17,198,588 against which cash
collateral of $17,724,893 was held in a Bear Stearns Deposit Account.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on the trade date. Net realized gains
and losses 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.
CLASS ALLOCATION
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 the relative net
assets of each class.
ORGANIZATION COSTS
Costs incurred in connection with the organization and initial registration
of the Fund have 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 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.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions 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 paid at least annually. Distributions are recorded by the Fund
on the ex-dividend date.
Distributions 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
reclassification. Distributions which exceed net investment income and net
realized gains for financial reporting purposes but not for tax purposes
are reported as dividends in excess net investment income or distributions
in excess of net realized gains. To the extent they exceed net investment
income and net realized gains for tax purposes they are reported as
distributions of capital.
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 of its net investment company taxable income and net realized gains to
shareholders. Therefore, no federal income tax provision is required.
20
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Notes to Financial Statements (Continued)
November 30, 1999
(Unaudited)
EXPENSE LIMITATIONS
PSAM and the Trust have undertaken to limit the Fund's expenses to certain
levels through the use of waivers and reimbursements as described below
under "Related Party Transactions".
NOTE 3 - RELATED PARTY TRANSACTIONS
The Trust has entered into an investment advisory agreement with PSAM. Under the
terms of the 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, 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.
Effective September 28, 1999, the Advisor contractually agreed to reduce its
fees and/or pay expenses for the Fund's classes of shares in order to limit such
expenses (excluding brokerage costs, interest, taxes, dividends payable with
respect to securities sold short and extraordinary expenses) to 2.37% of the
average daily net assets of the Fund's Institutional Shares and 2.87% of the
average daily net assets of the Fund's Investor Shares. This agreement has a
term ending September 30, 2000 and is renewable year to year thereafter. During
the six months ended November 30, 1999, PSAM voluntarily agreed to further limit
the total operating expenses of the Fund's classes (exclusive of brokerage
costs, interest, taxes, dividends payable with respect to securities sold short
and extraordinary expenses) to the annual rate of 2.17% of the average daily net
assets of the Fund's Institutional Shares and 2.67% of the average daily net
assets of the Fund's Investor Shares.
Prior to September 28, 1999, each class was obligated to pay PSAM such class'
deferred amount in future years, if any, when such class' expenses fell below
the stated percentage rate, but only to the extent that such payment would not
cause such class' expenses in any such future year to exceed the stated
percentage rate and provided that such class would not be obligated to pay the
deferred amount for any fiscal year more than two years after the end of the
fiscal year in which they were incurred. During the period June 1, 1999 through
September 27, 1999, PSAM reimbursed the Fund in the amount of $96,477. At
September 27, 1999, the cumulative unreimbursed amount of operating expenses
paid by PSAM on behalf of the Fund since inception was $405,317 which can be
recouped by 2001.
Effective September 28, 1999, each class is obligated to pay the deferred amount
for any fiscal year up to five years after the end of the fiscal year in which
they were incurred. During the period September 28, 1999 through November 30,
1999, the unreimbursed amount of operating expenses paid by PSAM on behalf of
the Fund was $33,052 which can be recouped by 2005.
Prior to July 1, 1999, BISYS Fund Services Ohio, Inc., a wholly owned subsidiary
of The BISYS Group, Inc. ("BISYS"), served as the administrator for the Trust
pursuant to an administration agreement. Under the administration agreement,
BISYS was entitled to a fee calculated daily and paid monthly at an annual rate
of 0.15% of the average daily net assets of the Trust. Effective July 1, 1999,
Investment Company Administration, L.L.C. ("ICA") became the administrator for
the Trust and will receive a fee calculated daily and paid monthly at an annual
rate of 0.10% of average net assets up to $200 million, 0.05% of average net
assets from $200 to $500 million and 0.03% of average net assets in excess of
$500 million, subject to an annual minimum fee of $40,000 per Fund and $15,000
for each additional class of shares. ICA has agreed to reduce it fees for
eighteen months starting July 1, 1999, to 0.05% of the Fund's average net assets
up to $500 million and 0.03% of average net assets in excess of $500 million,
subject to an annual minimum fee of $30,000 per Fund and $5,000 for each
additional class of shares.
21
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Notes to Financial Statements (Continued)
November 30, 1999
(Unaudited)
Prior to July 1, 1999, BISYS Fund Services, L.P., a wholly owned subsidiary of
BISYS, served as the Trust's principal underwriter and distributor. The Trust
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 monthly at the annual rate
of 0.50% of the average daily net assets of the Investor Shares of the Fund. The
distributor agreed to voluntarily reduce the amount of its fee to an annual rate
of 0.25% of average daily net assets of the Investor Shares of the Fund.
Effective July 1, 1999, First Fund Distributors, Inc. ("FFD"), an affiliate of
ICA, became the distributor for the Trust and received the same fees discussed
above. During the six months ended November 30, 1999, BISYS and FFD permanently
waived distribution fees of $6,691.
The distributors received sales charges totaling $156 from the sale of Investor
Class Shares during the six months ended November 30, 1999. The distributors
paid $140 in concessions to authorized dealers and retained $16.
The Trust has entered into a Shareholder Servicing Plan with its distributor for
services provided to holders of Investor Shares. Pursuant to the Shareholder
Servicing Plan, the Trust will pay its 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 BISYS, served as
fund accountant and transfer and dividend disbursing agent of the Fund through
June 30, 1999. Effective July 1, 1999, Investor Fiduciary Trust Company serves
as fund accountant and National Financial Data Services serves as transfer and
dividend disbursing agent.
Certain officers of the Trust are affiliated with PSAM or ICA and its
affiliates. Such persons are not paid by the Trust for serving in those
capacities.
NOTE 4 - SHARES OF BENEFICIAL INTEREST
The following is a summary of transactions in Institutional Shares and Investor
Shares for the six months ended November 30, 1999:
CAPITAL TRANSACTIONS
SHARES AMOUNT
------ ------
Institutional Shares:
Shares issued 120,486 $ 1,170,691
Shares redeemed (743,011) (7,055,328)
-------- -----------
Net decrease (622,525) $(5,884,637)
======== ===========
SHARES AMOUNT
------ ------
Investor Shares:
Shares issued 85,688 $ 827,662
Shares redeemed (525,245) (4,879,592)
-------- ------------
Net decrease (439,557) $ (4,051,930)
======== ============
22
<PAGE>
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Notes to Financial Statements (Continued)
November 30, 1999
(Unaudited)
NOTE 5 - INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities and
transactions relating to short sales) for the six months ended November 30,
1999, were as follows:
PURCHASES SALES
--------- -----
$44,396,761 $52,369,272
The cost of investments purchased to cover short sales and the proceeds from
investments sold short for the six months ended November 30, 1999, were
$33,786,465 and $28,090,527, respectively.
23
<PAGE>
INVESTMENT ADVISOR
Puget Sound Asset Management Co., LLC
911 Hildebrand Lane NE, Suite 102
Bainbridge Island, Washington 98110
DISTRIBUTOR
First Fund Distributor, Inc.
4455 E. Camelback Road, Suite 261E
Phoenix, AZ 85018
TRANSFER AGENT
National Financial Data Services, Inc.
330 West Ninth Street
Kansas City, MO 64105
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.
