McCORMICK CAPITAL MANAGEMENT, INC.
October 25, 1996
Dear Shareholders:
Attached with this letter is the audited annual report for the Elite Group
stock Growth & Income Fund and the bond Income Fund.
The fiscal year for the Elite Funds ended on September 30, completing The
Elite Mutual Funds ninth year. Many of you have been invested with us for the
majority of those years and some of you are new this year. We sincerely
appreciate everyone's support and patronage.
When we established the Elite Funds/McCormick Capital Management our goal
was to deliver a quality financial product that was cost effective for the
client and void of sales commissions. A financial product that would perform
well and avoid excessive risk. A financial product that was simple and flexible
in its format. We think we have been able to successfully deliver such a
product and we will continue to make it even better in the coming years.
The Elite Growth & Income Fund
(stock fund)
The financial statements that make up the Annual Report give us an opportunity
to review what has happened in the past and what may happen in the future.
Looking back, we are pleased to report that the stock Growth & Income Fund
appreciated 24.26% for the fiscal year. The five year annualized rate of
return is now 15.25% per year.
Health care companies continue to represent a larger portion of the Growth &
Income portfolio. The long-term investment story continues to be that an
increasing portion of our income is going to health care goods and services.
Something new in the Growth & Income Fund is a U.S. Government zero coupon bond
maturing in twenty three years. This investment represents 13.4% of the
portfolio. In my estimation this U.S. Government bond over the next year will
give us returns equal to, or greater than those returns available in the stock
market, but at a much lower level of risk.
The investment story we have outlined in numerous shareholder letters
continues to unfold. A competitive corporate America, international trade,
conservative politics and demographics are the forces that continue to
positively affect investment returns. The important thing about these trends
is that we expect them to continue well past the year 2000.
<PAGE>
The Elite Income Fund
(bond fund)
The last three years have seen increased volatility in the bond market.
1994 was down, 1995 was great and this most recent fiscal year 1996 was
disappointing, up only 3.79%. The fear of increasing inflation pushed
interest rates higher lowering bond prices. We think this fear of higher
inflation is misplaced. As we explained in shareholder letters we think
the long-term trend for inflation and interest is down which will produce
higher returns for the bond fund
Performance Comparisons
On the following pages are two charts that show the growth in value of a
hypothetical $10,000 investment in the Elite Income Fund, Growth & Income Fund
and various indices. The chart starts on 9/30/87 which was the beginning of
our first complete fiscal year. As an investor your investment results may
differ significantly depending on when you initiated your investment and if
there were subsequent investments.
Management of the funds does not think that there is only one index (stocks
or bonds) that accurately reflects the management of The Elite Funds. Our
funds are managed to our clients' objectives within the parameters of our
prospectus, following the rules and regulations of various regulatory agencies.
The various stock and bond indices are unmanaged, make no allowance for
operating expenses and are free from regulation and tax implications.
Regards,
\s\ Dick McCormick
Richard S. McCormick
<PAGE>
THE FOLLOWING TWO TABLES, INCLUDING AVERAGE ANNUAL TOTAL RETURN INFORMATION,
WERE PRESENTED AS GRAPHS IN THE SEPTEMBER 30, 1996 ANNUAL REPORT:
__________________________________________________________________________
ELITE GROWTH AND INCOME FUND AS COMPARED TO THE STANDARD & POORS 500
INDEX AND THE LIPPER GROWTH & INCOME FUND INDEX
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/1987 9/1988 9/1989 9/1990 9/1991 9/1992 9/1993 9/1994 9/1995 9/1996
Elite Growth & Income Fund 10,000 9,112 11,917 10,496 13,848 14,886 16,902 18,896 22,660 28,156
Standard & Poors 500 Index 10,000 8,789 11,683 10,608 13,900 15,432 17,433 18,075 23,445 28,209
Lipper Growth & Income Fund Index 10,000 9,326 11,729 10,302 13,319 14,627 16,961 17,448 21,475 25,244
(Figures represent annual total return and are in thousands of dollars.)
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
1 Year 24.26%
3 Years 18.55%
5 Years 15.25%
9 Years 12.19%
__________________________________________________________________________
ELITE INCOME FUND AS COMPARED TO THE LEHMAN SHORT-TERM GOVT. INDEX
AND THE LEHMAN INTERMEDIATE GOVT. INDEX
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/1987 9/1988 9/1989 9/1990 9/1991 9/1992 9/1993 9/1994 9/1995 9/1996
Elite Income Fund 10,000 11,027 12,041 12,877 14,513 15,771 17,254 16,552 18,631 19,337
Lehman Intermediate Govt. Index 10,000 11,063 12,080 13,117 14,901 16,758 18,038 17,767 19,650 20,652
Lehman Short-Term Govt. Index 10,000 10,875 11,841 12,945 14,403 15,829 16,611 16,802 18,178 19,207
(Figures represent annual total return and are in thousands of dollars.)
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
1 Year 3.79%
3 Years 3.87%
5 Years 5.91%
9 Years 7.59%
__________________________________________________________________________
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees
The Elite Group
We have audited the accompanying statements of assets and liabilities
of The Elite Growth and Income Fund and The Elite Income Fund, each a
series of shares of beneficial interest of The Elite Group, including the
portfolios of investments as of September 30, 1996, and the related
statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended
and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Funds' 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 audits
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 securities owned as of September 30, 1996 by
correspondence with the custodian. 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 Elite Growth and Income Fund and The Elite Income Fund as of
September 30, 1996, the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in
the period then ended in conformity with generally accepted accounting
principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
October 15, 1996
<PAGE>
Portfolio of Investments
The Elite Growth & Income Fund
September 30, 1996
Market Value
SHARES Note 2A
------------
COMMON STOCK 83.5%
BASIC INDUSTRY 7.6%
12,000 Dow Chemical $ 963,000
50,000 Longview Fiber Co 787,500
10,000 Ply-Gem Industries 122,500
10,000 Potash of Saskatchewan 731,250
40,000 Seagull Energy Corp* 785,000
--------------
Total Basic Industry 3,389,250
--------------
CAPITAL GOODS 19.5%
24,000 Arrow Electronics* 1,068,000
12,000 General Electric 1,092,000
24,000 Hewlett Packard 1,170,000
8,000 International Business Machines 996,000
9,500 Microsoft Corporation* 1,251,625
24,000 Seagate Technology* 1,341,000
12,000 U.S. Robotics Corp* 775,500
180,000 XactLabs Corporation* (a) 90,000
18,000 Xerox Corporation 965,250
--------------
Total Capital Goods 8,749,375
--------------
CONSUMER GOODS & SERVICES 23.4%
50,000 Cadmus Communication Corp 837,500
135,000 Coffee Station Inc.* (a) 303,750
45,000 Exide Corporation 1,164,375
60,000 Fingerhut Corporation 795,000
50,000 First Brands 1,306,250
24,000 Ford Motor Co. 750,000
16,000 General Motors Corp 768,000
50,000 H & R Block, Inc 1,487,500
20,000 Manpower Inc. 665,000
35,000 Optiva Corporation* (a) 420,000
50,000 Resound Corporation* 375,000
50,000 Singer Company N.V. 1,031,250
16,000 Viacom -B, Inc.* 568,000
--------------
Total Consumer Goods & Services 10,471,625
--------------
<PAGE>
Portfolio of Investments
The Elite Growth & Income Fund
September 30, 1996 - Continued
Market Value
SHARES Note 2A
--------------
FINANCIAL INTERMEDIARIES 11.3%
24,000 A.C.E. Limited (Insurance) 1,269,000
10,000 Dean Witter Discover & Co 550,000
36,000 Federal National Mortage 1,255,500
20,000 Mellon Bank 1,185,000
50,000 Pioneer Financial 818,750
-----------
Total Financial Intermediaries 5,078,250
-----------
HEALTH CARE GOODS & SERVICES 21.7%
12,000 American Home Products 765,000
16,000 Bristol-Myers Squibb 1,542,000
36,000 Foundation Health* 1,219,500
24,000 McKesson Corporation 1,137,000
13,800 Merck & Co. 971,175
16,000 Pfizer Inc. 1,266,000
8,000 Schering - Plough Corp 492,000
30,000 Sierra Health Services* 1,031,250
70,000 Value Health* 1,312,500
-----------
Total Health Care Goods & Services 9,736,425
-----------
Total Common Stock (Cost $27,518,337) 37,424,925
-----------
OPTIONS - COVERED CALLS ( 1.2%)
9,500 Microsoft Corp ($115 10-19-96) (165,062)
16,000 Pfizer Corp ($ 70 12-20-96) (162,000)
24,000 Seagate Technology ($55 12-20-96) (132,000)
12,000 U.S. Robotics ($65 11-15-96) ( 73,500)
-----------
Total Value of Calls (Cost $432,848) (532,562)
-----------
<PAGE>
Portfolio of Investments
The Elite Growth & Income Fund
September 30, 1996 - Continued
PAR VALUE Market Value
Note 2A
--------------
U.S. GOVERNMENT TREASURY 13.4%
$30,000,000 Zero Coupon Bond 7.35% - 7.46% (b) 05/15/19
(Cost $5,818,857) 5,976,896
------------
Total Investments
(Cost $32,904,346**) 95.7% 42,869,259
Cash and receivables
in excess of liabilities 4.3% 1,929,930
------ ------------
NET ASSETS 100.0% $ 44,799,189
====== ============
(a) Restricted security ( see note 3)
(b) Represents range of yields to maturity on purchase dates
* Non - income producing
** Cost for Federal Income Tax purposes is the same. At September 30,
1996, unrealized appreciation of securities for Federal Income Tax
purposes is as follows:
Unrealized appreciation $ 10,260,720
Unrealized depreciation (295,807)
------------------
Net unrealized appreciation $ 9,964,913
==================
See Notes to Financial Statement
<PAGE>
Portfolio of Investments
The Elite Income Fund
September 30, 1996
Market Value
Par Value Note 2A
------------
BONDS 92.9%
U.S. GOVERNMENT NOTES AND BONDS 33.8%
$ 900,000 U.S. Treasury Note
6.375% due 01/15/99 $ 904,347
1,750,000 U.S. Treasury Note
7.875% due 11/15/99 1,825,810
1,500,000 U.S. Treasury Bond
7.250% due 05/15/16 1,532,100
---------------
Total U.S. Government Notes and Bonds 4,262,257
---------------
ELECTRIC UTILITIES 20.9%
500,000 Portland General Electric
8.880% due 08/12/99 528,125
500,000 Commonwealth Edison
7.500% due 01/01/01 502,500
520,000 Ohio Power
6.750% due 04/01/03 510,900
500,000 Hawaiian Electric
6.660% due 12/05/05 468,125
650,000 Appalachian Power Co.
6.800% due 03/01/06 626,437
---------------
Total Electric Utility Bonds 2,636,087
---------------
GAS & ELECTRIC UTILITIES 23.0%
250,000 Consumer Power
8.750% due 02/15/98 257,188
500,000 Texas Utilities
5.875% due 04/01/98 496,250
170,000 Consumer Power
8.875% due 11/15/99 179,137
500,000 Louisiana Power & Light
6.000% due 03/01/00 486,875
500,000 Pacificorp
8.900% due 02/15/01 536,250
500,000 Long Island Lighting
7.050% due 03/15/03 459,375
500,000 Pacific Gas Transmission
7.100% due 06/01/05 489,375
---------------
Total Gas & Electric Utility Bonds 2,904,450
---------------
<PAGE>
Portfolio of Investments
The Elite Income Fund
September 30, 1996 - Continued
Market Value
PAR VALUE Note 2A
---------------
FINANCIAL/CORPORATE BONDS 15.2%
500,000 General Motors Acceptance Corp.
8.000% due 10/01/96 500,000
500,000 Ford Motor Credit
8.200% due 02/15/02 526,250
350,000 S. California Edison Capital Note
7.375% due 12/15/03 353,938
550,000 Federal Home Loan (Mortgage Backed)
6.100% due 02/15/24 533,687
------------
Total Financial/Corporate Bonds 1,913,875
------------
Total Value Bonds (Cost $11,846,132) 11,716,669
------------
SHARES
PREFERRED STOCK 4.7%
2,415 Cleveland Electric $9.125 244,820
3,560 Entergy Gulf States Utilities $8.64 350,660
------------
Total Value Preferreds (Cost $ 615,511) 595,480
------------
Total Investments
(Cost $12,461,643**) 97.6% 12,312,149
Cash and receivables
in excess of liabilities 2.4% 306,334
------ ------------
Net Assets 100.0% $12,618,483
====== ============
**Cost for Federal Income Tax purposes is the same.
At September 30, 1996, unrealized appreciation (depreciation) of securities
for Federal Income Tax purposes is as follows:
Unrealized appreciation $ 96,571
Unrealized depreciation (246,065)
-----------
Net unrealized depreciation $ (149,494)
===========
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1996
<TABLE>
<S> <C> <C>
THE ELITE GROWTH THE ELITE
& INCOME FUND INCOME FUND
---------------- -----------
ASSETS:
Investments in securities at value
(Notes 2A, & 3)
(Cost $32,904,346 and $12,461,643) $ 42,869,259 $ 12,312,149
Cash and cash equivalent (Note 2E) 1,853,109 53,629
Receivables:
Interest 8,368 250,965
Dividends 72,835 -
Capital stock sold 14,380 10,498
-------------- --------------
Total Assets 44,817,951 12,627,241
-------------- --------------
LIABILITIES:
Payables:
Capital stock reacquired 2,009 -
Distributions 8,995 4,694
Accrued expenses 7,758 4,064
-------------- --------------
Total Liabilities 18,762 8,758
-------------- --------------
NET ASSETS:
The Elite Growth & Income Fund--applicable to
2,180,397 shares outstanding $ 44,799,189
==============
The Elite Income Fund-applicable to 1,297,321
shares outstanding $ 12,618,483
==============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE
(Net assets / shares outstanding) $ 20.55 $ 9.73
============== ==============
At September 30, 1996 the components of net assets
were as follows:
Paid-in capital $ 29,763,585 $ 12,803,457
Accumulated net realized gain (loss) 5,049,366 (51,074)
Undistributed net investment income 21,325 15,594
Net unrealized appreciation (depreciation) 9,964,913 (149,494)
-------------- --------------
Net assets $ 44,799,189 $ 12,618,483
============== ==============
</TABLE>
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
THE ELITE
GROWTH & INCOME FUND
For the Years Ended September 30,
<TABLE>
<S> <C> <C>
1996 1995
---------------- -------------------
OPERATIONS:
Net investment income $ 230,586 $ 313,361
Net realized gain on investment
securities and options contracts 5,049,366 11,070
Net increase in unrealized
appreciation of investment securities 2,914,785 4,767,526
--------------- ---------------
Net increase in net assets
resulting from operations 8,194,737 5,091,957
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income (252,709) (315,833)
Distributions from net realized gains on
investment transactions - (1,974,649)
CAPITAL SHARE TRANSACTIONS:
Increase in net assets resulting from capital
share transactions (a) 5,674,686 3,000,541
--------------- ---------------
Total increase in net assets 13,616,714 5,802,016
NET ASSETS:
Beginning of period 31,182,475 25,380,459
--------------- ---------------
End of period (including undistributed
net investment income of $21,325 and
$3,015 respectively). $ 44,799,189 $ 31,182,475
=============== ===============
</TABLE>
(a)Transactions in capital stock were as follows:
<TABLE>
<S> <C> <C>
Year Ended Year Ended
September 30, 1996 September 30,1995
----------------------- ----------------------
Shares Value Shares Value
------ ----- ------ -----
Shares sold 430,984 $ 7,948,298 264,266 $ 3,896,405
Shares issued in reinvestment
of distributions 11,903 233,922 169,510 2,258,207
------- ------------ ------- ------------
442,887 8,182,220 433,776 6,154,612
Shares redeemed (136,267) (2,507,534) (220,131) (3,154,071)
------- ------------ ------- ------------
Net increase 306,620 $ 5,674,686 213,645 $ 3,000,541
======= ============ ======= ============
</TABLE>
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
THE ELITE
INCOME FUND
For the Years Ended September 30,
<TABLE>
<S> <C> <C>
1996 1995
-------- --------
OPERATIONS:
Net investment income $ 772,576 $ 731,551
Net realized gain (loss) on investments (45,430) 53,544
Net increase (decrease) in unrealized
appreciation of investment securities (265,285) 570,087
-------------- -------------
Net increase in net assets resulting from
operations 461,861 1,355,182
NET EQUALIZATION CREDITS (DEBITS) (NOTE 2d) (739) (3,798)
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income (798,599) (712,510)
Distributions from net realized gains on
investment transactions (69,581) ---
CAPITAL SHARE TRANSACTIONS:
Increase in net assets resulting from capital
share transactions (a) 660,024 221,770
-------------- -------------
Total increase in net assets 252,966 860,644
NET ASSETS:
Beginning of period 12,365,517 11,504,873
-------------- -------------
End of period (including undistributed
net investment income of $15,594 and
$20,132 respectively). $ 12,618,483 $ 12,365,517
============== =============
</TABLE>
(a)Transactions in capital stock were as follows:
<TABLE>
<S> <C> <C>
Year Ended Year Ended
September 30, 1996 September 30, 1995
------------------- -------------------
Shares Value Shares Value
------ ----- ------ -----
Shares sold 274,284 $ 2,723,932 216,852 $ 2,116,294
Shares issued in reinvestment
of distributions 85,432 844,750 70,878 689,314
------- ------------ ------- ------------
359,716 3,568,682 287,730 2,805,608
Shares redeemed (295,122) (2,908,658) (268,361) (2,583,838)
------- ------------ ------- ------------
Net increase 64,594 $ 660,024 19,369 $ 221,770
======= ============ ======= ============
</TABLE>
See Notes to Financial Statement
<PAGE>
FINANCIAL HIGHLIGHTS
THE ELITE
GROWTH & INCOME FUND
For a share outstanding throughout each period
<TABLE>
Years Ended September 30,
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
Net asset value, beginning of year $16.64 $15.29 $14.44 $13.07 $12.52
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .11 .18 .11 .10 .12
Net gains on securities
(both realized and unrealized) 3.92 2.52 1.56 1.65 .81
------- ------- ------- ------- --------
Total from investment
operations 4.03 2.70 1.67 1.75 .93
------- ------- ------- ------- --------
Less Distributions
Dividends from net investment
income (.12) (.18) (.10) (.09) (.11)
Distributions from capital gains --- (1.17) (.72) (.29) (.27)
------- ------- ------- ------- -------
Total distributions (.12) (1.35) (.82) (.38) (.38)
------- ------- ------- ------- -------
Net asset value, end of year $ 20.55 $ 16.64 $15.29 $ 14.44 $ 13.07
======= ======= ======= ======= =======
Total Return 24.26% 19.92% 11.80% 13.54% 7.50%
RATIOS/SUPPLEMENTAL DATA
Net asset value, end of year
(in 000's) $ 44,799 $31,182 $25,380 $17,989 $ 12,673
Ratio of expenses to average
net assets 1.33% 1.42%* 1.42% 1.36% 1.37%
Ratio of net investment income
to average net assets .61% 1.18% .73% .69% .91%
Portfolio turnover 156.93% 137.56% 153.34% 172.00% 168.01%
Average Brokerage Commissions $ .06 (1)
</TABLE>
* Ratio reflects fees paid through a directed brokerage arrangement. Expense
Ratios for 1994-1992 exclude these payments. No fees were paid through a
directed brokerage arrangement for 1996. Expense ratio for 1995 after
reduction of fees paid through the directed brokerage arrangement was 1.35%
(1) Not required information prior to 1996
See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS
THE ELITE
INCOME FUND
For a share outstanding throughout each period
Years Ended September 30,
<TABLE>
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
Net asset value, beginning of year $10.03 $ 9.48 $10.61 $10.28 $10.08
------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .60 .62 .61 .59 .61
Net gain (loss) on securities
(both realized and unrealized) (.23 ) .54 (1.03) .35 .23
-------- -------- ------- ------- -------
Total from investment
operations .37 1.16 (.42) .94 .84
-------- -------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment
income (.62) (.61) (.61) (.58) (.61)
Distributions from capital gains (.05) -- (.10) (.03) (.03)
-------- -------- ------- ------- --------
Total distributions (.67) (.61) (.71) (.61) (.64)
-------- -------- ------- ------- --------
Net asset value, end of year $ 9.73 $10.03 $ 9.48 $10.61 $10.28
======== ======== ======= ======= ========
Total Return 3.79% 12.56% (4.07%) 9.41% 8.67%
RATIOS/SUPPLEMENTAL DATA
Net asset value, end of year
(in 000's) $12,618 $12,366 $11,505 $11,751 $10,090
Ratio of expenses to average
net assets 1.00% 1.12% * 1.11% 1.02% .98%
Ratio of net investment income
to average net assets 6.01% 6.34% 5.98% 5.66% 6.03%
Portfolio turnover 43.37% 42.24% 40.88% 73.26% 21.83%
</TABLE>
* Ratio reflects fees paid through a directed brokerage arrangement.
Expense Ratios for 1994-1992 exclude these payments. No fees were
paid through a directed brokerage arrangement for 1996. Expense
ratio for 1995 after reduction of fees paid through the directed brokerage
arrangement was 1.08%.
See Notes to Financial Statement
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30,1996
NOTE 1 - ORGANIZATION
The Elite Growth and Income Fund and The Elite Income Fund (the FUNDS)
are two series of shares of beneficial interests of The Elite Group (the TRUST)
, which is registered under the Investment Company Act of 1940, as amended,
as a diversified open-end management company. The Trust was organized in
Massachusetts as a business trust on August 8, 1986. The Trust is authorized
to issue an unlimited number of no par shares of beneficial interest of any
number of series. Currently, the Trust has authorized only the two series
above. The Elite Growth & Income Fund investment objective is to maximize
total returns through an aggressive approach to the equity and debt securities
markets. The Elite Income Fund investment objective is to achieve the highest
income return obtainable over the long term commensurate with investments in
a diversified portfolio consisting primarily of investment grade debt
securities.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Funds. The policies are in conformity with
generally accepted accounting principles.
A. Security Valuation - Investments in securities traded on a
national securities exchange are valued at the last reported sales price.
Securities which are traded over the counter are valued at the bid price.
Securities for which reliable quotations are not readily available are valued
at their respective fair value as determined in good faith by, or under
procedures established by the Board of Trustees.
B. Federal Income Taxes - The Funds intend to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and distribute all its taxable income to its shareholders.
Therefore no federal income tax provision is required.
C. Option Accounting Principles (The Elite Growth & Income Fund) -
When the Fund sells an option, an amount equal to the premium received by the
Fund is included as an asset and an equivalent liability. The amount of the
liability is marked-to-market to reflect the current market value of the
options written. The current market value of a traded option is the last
sale price. When an option expires on its stipulated expiration date or the
Fund enters into a closing purchase transaction, the Fund realizes a gain
(or loss if the cost of a closing purchase transaction exceeds the premium
received when the option was sold) without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option is
extinguished. If an option is exercised, the Fund realizes a gain or loss
from the sale of the underlying security and the proceeds of the sale are
increased by the premium received. The Elite Growth & Income Fund as a writer
of an option may have no control over whether the underlying security may be
sold (call) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security underlying the written
option.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30,1996
D. Equalization (The Elite income Fund) - The Fund follows the
practice known as EQUALIZATION by which a portion of the proceeds from sales
and costs of repurchases of shares of the Fund is credited or charged to
income on the date of the transaction so that undistributed net income per
share is unaffected by shares of the Fund sold or repurchased.
E. Cash Equivalent - Consists of investment in mutual fund money
market accounts.
F. Other - As is common in the industry, security transactions are
accounted for on the trade date. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for post -
October losses. Interest income and estimated expenses are accrued daily.
G. Use Of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from those estimates.
Note 3 - Restricted Securities
The Funds may invest in restricted securities. Restricted securities
are securities which have not been registered under the Securities Act of
1933, as amended, and as a result are subject to restrictions on resale.
Investments in restricted securities are valued at fair value as determined in
good faith by the Trust's Board of Trustees. There are no unrestricted
securities of these issuers. At September 30, 1996, the Elite Growth and
Income Fund had investments in restricted securities with the date of
acquisition, cost, fair value and percentage of net assets listed below:
<TABLE>
<S> <C> <C> <C> <C>
Dates of Percentage of
Acquisition Cost Value Net Assets
Stocks
180,000 XactLabs Corporation. 08/29/94 $216,000 $ 90,000 .20%
35,000 Optiva Corporation 04/25/94 148,750 420,000 .94%
135,000 Coffee Station, Inc 04/16/96 303,750 303,750 .68%
------------ -------------
Total $668,500 $813,750 1.82%
==================== ============== =======
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
Note 4 - Purchases and Sales of Securities
For the year ended September 30, 1996, purchases and sales of
securities, other than options and short-term notes were as follows:
Purchases Sales
The Elite Growth and Income Fund $63,161,674 $56,517,378
The Elite Income Fund $ 6,396,349 $ 5,701,117
For The Elite Growth & Income Fund, transactions in covered call
options written were as follows:
Number of
Contracts* Premiums
Options outstanding at beginning of year 1,260 $ 789,425
Options written 3,755 2,147,090
Options terminated in closing
purchase transactions (3,143) (2,222,465)
Options exercised (485) (40,895)
Options expired (772) (240,307)
-------- -------------
Options outstanding at September 30,1996 615 $ 432,848
======== =============
* Each contract represents 100 shares of common stock
Note 5 - Investment Management Fee and Other Transactions with Affiliates
The Funds retain McCormick Capital Management Inc. as their Investment
Manager. Under an Investment Management Agreement, the Investment Manager
furnishes each Fund with investment advice, office space and salaries of
non-executive personnel needed by the Funds to provide general office
services. As compensation for its services, the Manager is paid a monthly
fee based upon the average daily net assets of each Fund. For The Elite
Growth & Income Fund and The Elite Income Fund, the rates are 1% and 7/10 of
1%, respectively, up to $250 million; 3/4 of 1% and 5/8% of 1%, respectively,
over $250 million up to $500 million; and 1/2 of 1% over $500
million for each Fund.
The Manager has undertaken that the operating expenses of each Fund
for each fiscal year (including management fees, but excluding taxes, interest
and brokerage commissions), expressed as a percentage of average daily net
assets, will not exceed the lowest rate prescribed by any state in which
shares of the Funds are qualified for sale.
Certain officers and trustees of the Funds are also officers and/or
directors of the Manager. The Law firm of Foster, Pepper & Shefelman, of
which Joseph M. Gaffney, Assistant Secretary of the Funds, is a member,
received fees of $2,738 and $1,125 from the Elite Growth & Income Fund and The
Elite Income Fund, respectively, for legal services rendered for the year
September 30, 1996.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
NOTE 6 - Directed Brokerage Arrangement
In an effort to reduce the total expenses of the Funds, a portion of
the operating expenses may be paid through an arrangement with a third-party
broker-dealer who is compensated through commission trades. Payment of the
operating expenses by the broker-dealer, is based on a percentage of
commissions earned. There were no expenses paid under this arrangement during
the year ended September 30, 1996
NOTE 7 - Concentration
Although both of the funds have a diversified investment portfolio,
there are certain credit risks due to the manner in which the portfolio is
invested which may subject the funds more significantly to economic changes
occurring in certain industries or sectors. The Elite Growth & Income Fund
has investments in excess of 10% in capital goods, consumer goods and services,
financial intermediaries, and health care goods and services industries.
The Elite Income Fund has investments in excess of 10% in electric utilities,
gas & electric utilities and financial industries.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799196
<NAME> The Elite Group
<SERIES>
<NUMBER> 001
<NAME> The Elite Growth & Income Fund
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 32,904,346
<INVESTMENTS-AT-VALUE> 42,869,259
<RECEIVABLES> 95,583
<ASSETS-OTHER> 1,853,109
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 44,817,951
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18,762
<TOTAL-LIABILITIES> 18,762
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,763,585
<SHARES-COMMON-STOCK> 2,180,397
<SHARES-COMMON-PRIOR> 1,873,777
<ACCUMULATED-NII-CURRENT> 21,325
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,049,366
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,964,913
<NET-ASSETS> 44,799,189
<DIVIDEND-INCOME> 580,059
<INTEREST-INCOME> 154,324
<OTHER-INCOME> 0
<EXPENSES-NET> 503,797
<NET-INVESTMENT-INCOME> 230,586
<REALIZED-GAINS-CURRENT> 5,049,366
<APPREC-INCREASE-CURRENT> 2,914,785
<NET-CHANGE-FROM-OPS> 8,194,737
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 252,709
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 430,984
<NUMBER-OF-SHARES-REDEEMED> 136,267
<SHARES-REINVESTED> 11,903
<NET-CHANGE-IN-ASSETS> 13,616,714
<ACCUMULATED-NII-PRIOR> 43,448
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 379,920
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 503,787
<AVERAGE-NET-ASSETS> 37,879,000
<PER-SHARE-NAV-BEGIN> 16.64
<PER-SHARE-NII> .11
<PER-SHARE-GAIN-APPREC> 3.92
<PER-SHARE-DIVIDEND> .12
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.55
<EXPENSE-RATIO> 1.33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799196
<NAME> The Elite Group
<SERIES>
<NUMBER> 002
<NAME> Elite Income Fund
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 12,461,643
<INVESTMENTS-AT-VALUE> 12,312,149
<RECEIVABLES> 261,463
<ASSETS-OTHER> 53,629
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,627,241
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,758
<TOTAL-LIABILITIES> 8,758
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,803,457
<SHARES-COMMON-STOCK> 1,297,321
<SHARES-COMMON-PRIOR> 1,232,727
<ACCUMULATED-NII-CURRENT> 15,594
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 51,074
<ACCUM-APPREC-OR-DEPREC> (149,494)
<NET-ASSETS> 12,618,483
<DIVIDEND-INCOME> 81,518
<INTEREST-INCOME> 819,569
<OTHER-INCOME> 0
<EXPENSES-NET> 128,511
<NET-INVESTMENT-INCOME> 772,576
<REALIZED-GAINS-CURRENT> (45,430)
<APPREC-INCREASE-CURRENT> (265,285)
<NET-CHANGE-FROM-OPS> 461,861
<EQUALIZATION> (739)
<DISTRIBUTIONS-OF-INCOME> 798,599
<DISTRIBUTIONS-OF-GAINS> 69,581
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 274,284
<NUMBER-OF-SHARES-REDEEMED> 295,122
<SHARES-REINVESTED> 85,432
<NET-CHANGE-IN-ASSETS> 252,966
<ACCUMULATED-NII-PRIOR> 42,356
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 5,644
<GROSS-ADVISORY-FEES> 90,041
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 134,437
<AVERAGE-NET-ASSETS> 12,851,100
<PER-SHARE-NAV-BEGIN> 10.03
<PER-SHARE-NII> .60
<PER-SHARE-GAIN-APPREC> (.23)
<PER-SHARE-DIVIDEND> .62
<PER-SHARE-DISTRIBUTIONS> .05
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.73
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
