October 15, 1997
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 tenth 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 34.66% for the fiscal year. The three, five and ten year annualized
rate of return is now 26.13%, 20.56% and 14.26 per year.
The most significant change in our investments has been to reduce the risk in
our portfolio. Given several years of exceptional performance we think the
investment risks have increased. We doubt the stock market is about to "crash"
but we do feel there is an increased possibility of a market correction.
To reduce the risk in the portfolio we have increased the amount invested in
U.S. Government zero coupon bonds to 29.1% of the portfolio. We believe these
U.S. Government bonds will give us returns equal to or greater than those
returns available in the stock market , but at a much lower level of risk.
We continue to have a strong emphasis on technology and growth with virtually no
investments in utilities or cyclical type companies. About two-thirds of our
investments are considered to be larger companies ("big cap") while the
remaining one-third are smaller companies.
<PAGE>
The Elite Income Fund
(bond fund)
Lower interest rates and higher bond prices gave us a 9.20% return in the bond
Income Fund. The three, five and ten year annualized rate of return was 8.46%,
6.01% and 7.75% respectively.
The key to good returns in our bond fund is inflation expectations. We continue
to forecast continued low inflation for the next several years which should
result in good returns for the Income 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>
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, 1997, 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, 1997 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, 1997,
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, 1997
<PAGE>
<TABLE>
Portfolio of Investments
The Elite Growth & Income Fund
September 30, 1997
<S> <C> <C> <C>
Market Value
Shares Note 2A
-----------------------
Common Stock 70.0%
----------------
Basic Industry 2.2%
80,000 Ensearch Exploration* $ 720,000
30,000 Seagull Energy Corp* 765,000
-----------------------
-----------------------
Total Basic Industry 1,485,000
-----------------------
Capital Goods 22.0%
180,000 Atrieva Corporation* (a) 1,800
40,000 Cable Design Technologies* 1,522,500
20,000 Cisco Systems* 1,461,250
20,000 Computer Sciences Corp* 1,415,000
24,000 Hewlett-Packard 1,669,500
12,000 Intel Corporation 1,108,500
16,000 I.B.M. Corporation 1,695,000
16,000 Microsoft Corporation* 2,117,000
20,000 Sun Microsystems* 935,000
45,000 U.S. Filter* 1,937,813
12,000 Xerox Corporation 1,010,250
-----------------------
Total Capital Goods 14,873,613
-----------------------
Consumer Goods & Services 22.5%
50,000 Amway Asia Pacific 1,465,625
40,000 Callaway Golf Co. 1,395,000
Coffee Station, Inc* (a) 303,750
135,000
30,000 CUC International* 930,000
20,000 General Motors 1,338,750
120,000 GT Bicycles* 982,500
30,000 H & R Block, Inc 1,158,750
18,000 Manpower Inc. 711,000
20,000 Mattel Inc. 662,500
35,000 Optiva Corporation* (a) 875,000
70,000 Saks Holdings* 1,461,250
40,000 Samsonite Corporation* 1,755,000
80,000 Singer Company 1,375,000
55,000 Veterinarian Centers of America* 814,687
-----------------------
Total Consumer Goods & Services 15,228,812
-----------------------
-----------------------
-----------------------
</TABLE>
<PAGE>
Portfolio of Investments
The Elite Growth & Income Fund
September 30, 1997- Continued
<TABLE>
<S> <C> <C> <C>
Market Value
Shares Note 2A
---------------------
- ------------------
Financial Intermediaries 12.1%
20,000 A.C.E Limited (Insurance) 1,880,000
40,000 Freddie Mac 1,410,000
32,000 Fannie Mae 1,504,000
24,000 General Electric 1,633,500
Total Financial Intermediaries
32,000 Mellon Bank 1,752,000
---------------------
Total Financial Intermediaries 8,179,500
---------------------
Health Care Goods & Services 11.2%
12,000 American Home Products 876,000
30,000 Genesis Health Ventures* 1,168,125
13,800 Merck & Company 1,379,138
30,000 Pfizer Inc. 1,801,875
40,000 Sierra Health Services* 1,465,000
32,000 U.S. Surgical 934,000
---------------------
Total Health Care Goods & Services 7,624,138
---------------------
Total Common Stock (Cost $29,830,091) 47,391,063
---------------------
Options - Covered Calls (1.6%)
20,000 Cable Design Tech ( $40 01-16-98) ( 62,500)
40,000 Callaway Golf ( $35 11-21-97) ( 67,500)
24,000 Hewlett Packard ( $65 11-21-97) ( 171,000)
16,000 Manpower ( $45 12-19-97) ( 15,000)
16,000 Microsoft ( $130 01-16-98) ( 208,000)
30,000 Pfizer Inc. ( $52.50 12-19-97) ( 266,250)
40,000 Samsonite ( $50 12-19-97) ( 73,750)
50,000 Saks Holdings ( $25 01-16-98) ( 39,063)
30,000 Seagull ( $25 11/21/97) ( 75,000)
20,000 Sun Microsystem ( $47.50 01/16/98) ( 93,750)
---------------------
Total Value of Calls (Cost ($ 1,088,662)) ( 1,071,813)
---------------------
</TABLE>
<PAGE>
Portfolio of Investments
The Elite Growth & Income Fund
September 30, 1997- Continued
<TABLE>
<S> <C> <C>
Par Value Market Value
--------------------
Note 2A
---------------------
U.S. Government Treasury 29.1%
$80,000,000 Zero Coupon Bond due 05/15/19 (b) 19,689,600
---------------------
Total Value of Bonds - (Cost $17,303,982) 19,689,600
Total Investments
(Cost $ 46,045,411**) 66,008,850
97.5%
Cash and receivables
in excess of liabilities 2.5% 1,709,919
------------------- ---------------------
NET ASSETS 100.0% $ 67,718,769
=================== =====================
</TABLE>
(a) Restricted security ( see note 3)
(b) Purchased in a yield to maturity range of 7.05% to 7.46% * Non - income
producing ** Cost for Federal Income Tax purposes is the same. At September 30,
1997 unrealized appreciation of securities for Federal Income Tax purposes is
as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 21,117,240
Unrealized depreciation (1,153,801)
======================
Net unrealized appreciation $ 19,963,439
======================
</TABLE>
See Notes to Financial Statement
<PAGE>
Portfolio of Investments
The Elite Income Fund
September 30, 1997
<TABLE>
<S><C> <C> <C>
Market Value
Par Value Note 2A
-----------------------
Bonds 93.8%
- ---------------------
U.S. Government Notes and Bonds 58.1%
$ 2,100,000 U.S. Treasury Note
7.875% due 11/15/99 $ 2,183,496
3,150,000 U.S. Treasury Note
6.250% due 02/15/03 3,180,555
3,790,000 U.S. Treasury Bond
7.250% due 05/15/16 4,113,135
-----------------------
Total U.S. Government Notes and Bonds 9,477,186
-----------------------
Electric Utilities 13.4%
500,000 Portland General Electric
8.880% due 08/12/99 523,125
520,000 Ohio Power
6.750% due 04/01/03 525,200
500,000 Hawaiian Electric
6.660% due 12/05/05 485,625
650,000 Appalachian Power Co.
6.800% due 03/01/06 652,438
-----------------------
Total Electric Utility Bonds 2,186,388
-----------------------
Gas Utilities 11.5%
770, 000 Consumer Energy Co.
8.875% due 11/15/99 807,538
450,000 Entergy Arkansas Inc
7.000% due 03/01/02 456,188
600,000 Pacific Gas Transmission
7.100% due 06/01/05 609,750
-----------------------
Total Gas Utilities 1,873,476
-----------------------
</TABLE>
<PAGE>
Portfolio of Investments
The Elite Income Fund
September 30, 1997 - Continued
<TABLE>
<S><C> <C> <C>
Market Value
Par Value Note 2A
-----------------------
- ---------------------
Financial/Corporate Bonds 10.8%
700,000 Ford Motor Credit
8.200% due 02/15/02 746,375
350,000 S. California Edison Capital Notes
7.375% due 12/15/03 354,813
550,000 Federal Home Loan (Mortgage Backed)
6.100% due 02/15/24 547,913
500,000 Federal Home Loan
0.000% due 09/29/17 106,820
-----------------------
Total Financial/Corporate Bonds 1,755,921
-----------------------
Total Value Bonds (Cost $15,048,735) 15,292,971
-----------------------
Shares
Preferred Stock 1.7%
2,844 Entergy Gulf State Utilities $8.64 281,556
----------------------
Total Value Preferreds (Cost $295,111) 281,556
----------------------
Total Investments
(Cost $15,343,846) 95.5% 15,574,527
Cash and receivables
in excess of liabilities 4.5% 737,416
------------ ----------------------
Net Assets 100.0% $ 16,311,943
============ ======================
</TABLE>
**Cost for Federal Income Tax purposes is the same.
At September 30, 1997, unrealized appreciation (depreciation) of securities
for Federal Income Tax purposes is as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 337,824
Unrealized depreciation (107,143)
---------------------
Net unrealized depreciation $ 230,681
=====================
</TABLE>
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
<TABLE>
<S> <C> <C>
THE ELITE GROWTH & INCOME THE ELITE INCOME FUND
FUND
----------------------------- ----------------------
ASSETS:
Investments in securities at value (notes 2A, 3 )
(Cost $46,045,411 and $15,343,846) $ 66,008,850 $ 15,574,527
Cash and cash equivalent (Note 2E) 1,680,521 438,506
Receivables:
Interest 8,125 312,166
Dividends 35,450 ---
Capital stock sold 64,515 ---
----------------------- -----------------------
Total Assets 67,797,461 16,325,199
----------------------- -----------------------
LIABILITIES:
Payables:
Capital stock reacquired 12,009 ---
Distributions 57,010 10,311
Accrued expenses 9,673 2,945
----------------------- ----------------------
Total Liabilities 78,692 13,256
----------------------- ----------------------
NET ASSETS:
The Elite Growth & Income Fund--applicable to
3,043,347 shares outstanding $ 67,718,769
=======================
The Elite Income Fund-applicable to 1,631,791
shares outstanding $ 16,311,943
======================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net assets / shares outstanding)
$ 22.25 $ 10.00
=======================
======================
At September 30, 1997 the components of net assets were as follows:
Paid-in capital $ 47,755,330 $ 16,116,770
Accumulated net realized loss - (46,324)
Undistributed net investment income - 10,816
Net unrealized appreciation 19,963,439 230,681
======================= ======================
Net assets $ 67,718,769 $ 16,311,943
======================= ======================
</TABLE>
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1997
<TABLE>
<S> <C> <C>
THE ELITE GROWTH & INCOME FUND THE ELITE INCOME FUND
-------------------------- -----------------------
INVESTMENT INCOME:
Income:
Interest $ 1,024,511 $ 942,241
Dividends 433,697 41,777
----------------------- -----------------------
Total Income 1,458,208 984,018
----------------------- -----------------------
Expenses:
Investment management fee 544,948 98,900
Transfer agent fees 33,698 19,367
Custodian fees 27,580 8,360
Professional fees (Note 6) 15,648 4,162
Trustees fees and expenses 16,000 4,000
Record keeping services 49,646 13,800
Shareholder reports 4,447 1,100
Registration fees and other 14,964 3,514
----------------------- -----------------------
Total Expenses 706,931 153,203
----------------------- -----------------------
Fees paid indirectly (Note 6) (16,600) ---
Fees paid by manager (Note 5)
Expenses Reimbursed (17,221)
----------------------- -----------------------
Net Expenses 690,331 135,982
----------------------- -----------------------
Net Investment Income 767,877 848,036
----------------------- -----------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES AND
OPTIONS CONTRACT
Net realized gain (loss):
Investment securities 7,771,305 4,750
Expired and closed covered call
options written (Note 4) (1,863,985) ---
----------------------- ----------------------
Net realized gain on investment securities
and option contracts 5,907,320 4,750
----------------------- ----------------------
Net increase in unrealized appreciation
of investment securities 9,998,526 380,175
======================= ======================
Net increase in net assets resulting
from operations $ 16,673,723 $ 1,232,961
======================= ======================
</TABLE>
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS
THE ELITE
GROWTH & INCOME FUND
For the Years Ended September 30
<TABLE>
<S> <C> <C>
1997 1996
----------------------- ------------------------
OPERATIONS:
Net investment income $ 767,877 $ 230,586
Net realized gain on investment
securities and options contracts 5,907,320 5,049,366
Net increase in unrealized appreciation
of investment securities 9,998,526 2,914,785
----------------------- -----------------------
Net increase in net assets resulting
from operations 16,673,723 8,194,737
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income (751,449) (252,709)
Distributions from net realized gains on
investment transactions (11,069,678) ---
CAPITAL SHARE TRANSACTIONS:
Increase in net assets resulting from capital share
transactions (a) 18,066,984 5,674,686
----------------------- -----------------------
Total increase in net assets 22,919,580 13,616,714
NET ASSETS:
Beginning of year 44,799,189 31,182,475
======================= =======================
End of year (including undistributed
net investment income of $ - 0 - and
$21,325 respectively). $ 67,718,769 $ 44,799,189
======================= =======================
</TABLE>
(a) Transactions in capital stock were as follows:
<TABLE>
<S> <C> <C>
Year Ended Year Ended
September 30, 1997 September 30, 1996
Shares Value Shares Value
--------------- ------------------- ------------- -------------------
Shares sold 464,160 $ 9,881,155 430,984 $ 7,948,298
Shares issued in reinvestment
of distributions 563,824 11,716,467 11,903 233,922
--------------- ------------------- ------------- -------------------
1,027,984 21,597,622 442,887 8,182,220
Shares redeemed (165,034) (3,530,638) (136,267) (2,507,534)
--------------- ------------------- ------------- -------------------
Net increase 862,950 $18,066,984 306,620 $ 5,674,686
=============== =================== ============= ===================
</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>
1997 1996
----------------------- ---------------------
OPERATIONS:
Net investment income $ 848,036 $ 772,576
Net realized gain (loss)on investment securities (45,430)
4,750
Net increase (decrease) in unrealized
appreciation of investment securities 380,175 (265,285)
----------------------- ---------------------
Net increase in net assets resulting from
operations 1,232,961 461,861
NET EQUALIZATION CREDITS (DEBITS) (NOTE 2d) 19,511 (739)
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income (872,325) (798,599)
Distributions from net realized gains on
investment transactions --- (69,581)
CAPITAL SHARE TRANSACTIONS:
Increase in net assets resulting from capital
share transactions (a) 3,313,313 660,024
----------------------- ---------------------
Total increase in net assets 3,693,460 252,966
NET ASSETS:
Beginning of year 12,618,483 12,365,517
======================= =====================
End of year (including undistributed net
investment income of $10,816 and $15,594
respectively). $ 16,311,943 $ 12,618,483
======================= =====================
</TABLE>
(a)Transactions in capital stock were as follows:
<TABLE>
<S> <C> <C>
Year Ended Year Ended
September 30,1997 September 30,1996
-------------------------------- --------------------------
Shares Value Shares Value
--------------- ------------------ -------------- ------------------
Shares sold 545,012 $ 5,376,650 274,284 $ 2,723,932
Shares issued in reinvestment
of distributions 85,735 842,573 85,432 844,750
--------------- ------------------ -------------- ------------------
630,747 6,219,223 359,716 3,568,682
Shares redeemed (296,277) (2,905,910) (295,122) (2,908,658)
--------------- ------------------ --------------
==================
Net increase 334,470 $ 3,313,313 64,594 $ 660,024
=============== ================== ============== ==================
</TABLE>
See Notes to Financial Statement
<PAGE>
FINANCIAL HIGHLIGHTS
THE ELITE
GROWTH & INCOME FUND
For a share outstanding throughout each year
<TABLE>
Years Ended September 30,
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
----- ---- ---- ---- ----
Net asset value, beginning of year $ 20.55 $ 16.64 $ 15.29 $ 14.44 $13.07
--------------- ------------- -------------- -------------- ---------------
Income from investment operations
Net investment income .29 .11 .18 .11 .10
Net gains on securities
(both realized and unrealized) 6.15 3.92 2.52 1.56 1.65
--------------- ------------- -------------- -------------- ---------------
Total from investment
operations 6.44 4.03 2.70 1.67 1.75
--------------- ------------- -------------- -------------- ---------------
Less Distributions
Dividends from net investment
income (.29) (.12) (.18) (.10) (.09)
Distributions from capital gains (4.45) --- (1.17) (.72) (.29)
--------------- ------------- -------------- -------------- ---------------
Total distributions (4.74) (.12) (1.35) (.82) (.38)
--------------- ------------- -------------- -------------- ---------------
Net asset value, end of year $ 22.25 $ 20.55 $ 16.64 $ 15.29 $ 14.44
=============== ============= ============== ============== ===============
Total Return 34.66% 24.26% 19.92% 11.80% 13.54%
Ratios/Supplemental Data
Net asset value, end of period
(in 000's) $ 67,719 $ 44,799 $31,182 $25,380 $17,989
Ratio of expenses to average net
assets 1.30%* 1.33% 1.42%* 1.42% 1.36%
to average net assets 1.41% .61% 1.18% .73% .69%
Portfolio turnover 115.80% 156.93% 137.56% 153.34% 172.00%
Average Brokerage Commissions $ .0582 .0600 (1) (1) (1)
</TABLE>
*Ratio reflects fees paid through a directed brokerage arrangement. Expense
Ratios for 1994 and 1993 exclude these payments. No fees were paid through a
brokerage arrangement for 1996. The expense ratios for 1997 and 1995 after
reduction of fees paid through the directed brokerage arrangement were 1.27%
and 1.35%, respectively.
(1)Not required information prior to 1996
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS
THE ELITE
INCOME FUND
For a share outstanding throughout each year
<TABLE>
Years Ended September 30,
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Net asset value, beginning of year $ 9.73 $ 10.03 $ 9.48 $ 10.61 $10.28
---------------- -------------- -------------- -------------- ---------------
Income from investment operations
Net investment income .60 .60 .62 .61 .59
Net gain (loss) on securities
(both realized and unrealized) .27 (.23) .54 (1.03) .35
---------------- -------------- -------------- -------------- ---------------
Total from investment
operations .87 .37 1.16 (.42) .94
---------------- -------------- -------------- -------------- ---------------
Less Distributions
Dividends from net investment
income (.60) (.62) (.61) (.61) (.58)
Distributions from capital gains --- (.05) --- (.10) (.03)
---------------- -------------- -------------- -------------- ---------------
Total distributions (.60) (.67) (.61) (.71) (.61)
---------------- -------------- -------------- -------------- ---------------
Net asset value, end of year $ 10.00 $ 9.73 $ 10.03 $ 9.48 $ 10.61
================ ============== ============== ============== ===============
Total Return 9.20% 3.79% 12.56% (4.07%) 9.41%
Ratios/Supplemental Data
Net asset value, end of year
(in 000's) $ 16,312 $ 12,618 $ 12,366 $ 11,505 $ 11,751
Ratio of expenses to average
net assets .96% 1.00% 1.12%* 1.11% 1.02%
Ratio of net investment income
to average net assets 6.01% 6.01% 6.34% 5.98% 5.66%
Portfolio turnover 37.60% 43.37% 42.24% 40.88% 73.26%
</TABLE>
* Ratio reflects fees paid though a directed brokerage arrangement. Expense
ratios for 1994 and 1993 exclude these payments. No fees were paid through
a directed brokerage arrangement for 1997 or 1996. Expense ratio for 1995
after reduction of fees paid through the directed brokerage arrangement was
1.08%
See Notes to Financial Statement
NOTES TO FINANCIAL STATEMENTS
September 30,1997
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.
NOTES TO FINANCIAL STATEMENTS
September 30,1997
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, 1997, 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> <C>
Dates of Percentage of Net
Acquisition Cost Value Assets
Stocks
180,000 Atriva Corporation. 08/29/94 $216,000 $ 1,800 .00%
35,000 Optiva Corporation 04/25/94 148,750 875,000 1.29%
135,000 Coffee Station, Inc 04/16/96 303,750 303,750 .45%
-------
--------------- ----------------
Total $668,500 $1,180,550 1.74%
=============== ================ ============
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
Note 4 - Purchases and Sales of Securities
For the year ended September 30, 1997, purchases and sales of
securities, other than options and short-term notes were as follows:
<TABLE>
<S> <C> <C>
Purchases Sales
The Elite Growth and Income Fund $66,978,021 $61,817,357
The Elite Income Fund $ 7,959,091 $ 5,081,645
</TABLE>
For The Elite Growth & Income Fund, transactions in covered call options written
were as follows:
<TABLE>
<S> <C> <C>
Number of
Contracts* Premiums
Options outstanding at beginning of year 615 $ 432,848
Options written 8,596 3,555,945
Options terminated in closing purchase transactions (6,061) (2,761,835)
Options exercised (130) (99,597)
Options expired (160) (38,699)
=============== ====================
Options outstanding at September 30,1997 2,860 $ 1,088,662
=============== ====================
</TABLE>
* 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 may voluntary reimburse a portion of the operating expenses
of a Fund for any fiscal year (including management fees, but excluding taxes,
interest and brokerage commissions). Voluntary reimbursements may cease at any
time without prior notice.
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
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. Expenses paid under this arrangement during the year ended September 30,
1997 were $16,600 for the Elite Growth & Income Fund.
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
utilities and financial industries.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799196
<NAME> The Elite Group
<SERIES>
<NUMBER> 01
<NAME> Elite Growth and Income Fund
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Sep-30-1997
<PERIOD-START> Oct-01-1996
<PERIOD-END> Sep-30-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 46,045,411
<INVESTMENTS-AT-VALUE> 66,008,850
<RECEIVABLES> 108,090
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1,680,521
<TOTAL-ASSETS> 67,797,461
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 78,692
<TOTAL-LIABILITIES> 78,692
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 47,755,330
<SHARES-COMMON-STOCK> 3,043,347
<SHARES-COMMON-PRIOR> 2,180,397
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,963,439
<NET-ASSETS> 67,718,769
<DIVIDEND-INCOME> 433,697
<INTEREST-INCOME> 1,024,511
<OTHER-INCOME> 0
<EXPENSES-NET> 690,331
<NET-INVESTMENT-INCOME> 767,877
<REALIZED-GAINS-CURRENT> 5,907,320
<APPREC-INCREASE-CURRENT> 9,998,526
<NET-CHANGE-FROM-OPS> 16,673,732
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (751,449)
<DISTRIBUTIONS-OF-GAINS> (11,069,678)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 464,160
<NUMBER-OF-SHARES-REDEEMED> (165,034)
<SHARES-REINVESTED> 563,824
<NET-CHANGE-IN-ASSETS> 22,919,580
<ACCUMULATED-NII-PRIOR> 21,325
<ACCUMULATED-GAINS-PRIOR> 5,049,366
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 544,948
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 706,931
<AVERAGE-NET-ASSETS> 54,527,764
<PER-SHARE-NAV-BEGIN> 20.55
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> 6.15
<PER-SHARE-DIVIDEND> (0.29)
<PER-SHARE-DISTRIBUTIONS> (4.45)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22.25
<EXPENSE-RATIO> 1.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799196
<NAME> The Elite Group
<SERIES>
<NUMBER> 02
<NAME> Elite Income Fund
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Sep-30-1997
<PERIOD-START> Oct-01-1996
<PERIOD-END> Sep-30-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 15,343,846
<INVESTMENTS-AT-VALUE> 15,574,527
<RECEIVABLES> 312,166
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 438,506
<TOTAL-ASSETS> 16,325,199
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,256
<TOTAL-LIABILITIES> 13,256
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,116,770
<SHARES-COMMON-STOCK> 1,631,791
<SHARES-COMMON-PRIOR> 1,297,321
<ACCUMULATED-NII-CURRENT> 10,816
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (46,324)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 230,681
<NET-ASSETS> 16,311,943
<DIVIDEND-INCOME> 41,777
<INTEREST-INCOME> 942,241
<OTHER-INCOME> 0
<EXPENSES-NET> 135,982
<NET-INVESTMENT-INCOME> 848,036
<REALIZED-GAINS-CURRENT> 4,750
<APPREC-INCREASE-CURRENT> 380,175
<NET-CHANGE-FROM-OPS> 1,232,961
<EQUALIZATION> 19,511
<DISTRIBUTIONS-OF-INCOME> (872,325)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 545,012
<NUMBER-OF-SHARES-REDEEMED> (296,277)
<SHARES-REINVESTED> 85,735
<NET-CHANGE-IN-ASSETS> 3,693,460
<ACCUMULATED-NII-PRIOR> 15,594
<ACCUMULATED-GAINS-PRIOR> (51,074)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 98,900
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 153,203
<AVERAGE-NET-ASSETS> 14,117,911
<PER-SHARE-NAV-BEGIN> 9.73
<PER-SHARE-NII> 0.60
<PER-SHARE-GAIN-APPREC> 0.27
<PER-SHARE-DIVIDEND> (0.60)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> .96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
