<TABLE>
<CAPTION>
Portfolio of Investments
The Elite Growth & Income Fund
March 31, 1998
(unaudited)
Market Value
Shares Note 2A
------------------
Common Stock 83.5%
--------------
Capital Goods 23.6%
<S> <C> <C>
30,000 AMP Incorporated $ 1,314,375
180,000 Atrieva Inc. * (a) 36,000
30,000 Cisco Systems* 2,051,250
24,000 General Electric 2,068,500
24,000 Hewlett-Packard 1,521,000
16,000 I.B.M. Corporation 1,662,000
32,000 Microsoft Corporation* 2,862,000
24,000 Perkin Elmer 1,735,500
40,000 Raychem 1,662,500
30,000 Thomas & Betts 1,920,000
40,000 U.S. Filter* 1,405,000
16,000 Xerox Corporation 1,703,000
------------------
Total Capital Goods 19,941,125
------------------
Consumer Goods & Services 21.2%
50,000 Callaway Golf 1,450,000
135,000 Coffee Station, Inc* (a) 202,500
80,000 Eagle Hardware & Garden* 1,410,000
26,000 Federal Express* 1,849,250
20,000 General Motors 1,348,750
30,000 H.R. Block 1,426,875
35,000 Manpower 1,413,125
24,000 Mattel Incorporated 951,000
35,000 Optiva * (a) 875,000
40,000 Starbucks* 1,812,500
60,000 Sherwin Williams 2,130,000
80,000 Veterinarian Center* 1,290,000
60,000 Zale Corporation* 1,732,500
------------------
Total Consumer Goods & Services 17,891,500
------------------
Financial Intermediaries 11.6%
48,000 A.C.E Limited (Insurance) 1,809,000
32,000 Federal National Mortgage 2,024,000
20,000 Marsh & McClellan 1,746,250
32,000 Mellon Bank Inc. 2,032,000
30,000 Washington Mutual 2,150,625
------------------
Total Financial Intermediaries 9,761,875
------------------
Portfolio of Investments
The Elite Growth & Income Fund
March 31, 1998 - Continued
(unaudited)
Market Value
Shares Note 2A
-----------------
- ----------------------------------------------------------------------------------------------
Health Care Goods & Services 8.6%
20,000 American Home Products 1,907,500
16,000 Merck & Co. 2,054,000
15,000 Pfizer Inc. 1,495,313
55,000 U.S. Surgical 1,815,000
-----------------
Total Health Care Goods & Services 7,271,813
-----------------
Energy 18.6%
30,000 Anadarko Petroleum 2,070,000
30,000 Camco International 1,815,000
180,000 EEX Corporation* 1,766,250
80,000 Global Marine* 1,980,000
81,900 Ocean Energy* 1,929,769
70,000 Pogo Producing 2,222,500
170,000 Seagull Energy Corporation* 3,261,875
8,000 Schlumberger Ltd. 606,000
-----------------
Total Energy 15,651,394
-----------------
Total Common stock (Cost $46,076,656) 70,517,706
Options - Covered Calls ( 2.4%)
20,000 Cisco ( $ 70.00 07-17-98) (100,000)
61,000 EEX ( $ 10.00 07-17-98) ( 61,000)
32,000 Fannie Mae ( $ 65.00 06-19-98) ( 88,000)
24,000 General Electric ( $ 80.00 06-19-98) (207,000)
24,000 Hewlett Packard ( $ 75.00 01-15-99) ( 94,500)
24,000 Mattel ( $ 47.50 07-17-98) ( 17,250)
16,000 Merck ( $120.00 01-15-99) (310,000)
32,000 Microsoft ( $ 85.00 07-17-98) (298,000)
15,000 Pfizer ( $ 85.00 06-19-98) (253,125)
80,000 Seagull Energy ( $ 20.00 08-21-98) (220,000)
60,000 Sherwin Williams ( $ 35.00 06-19-98) (121,875)
80,000 Veterinarian Center ( $ 17.50 09-18-98) (120,000)
16,000 Xerox ( $110.00 01-15-99) (164,000)
-----------------
Total Value of Calls (Cost $2,011,171) ( 2,054,750)
-----------------
Portfolio of Investments
The Elite Growth & Income Fund
March 31, 1998- Continued
(unaudited)
Par Value Market Value
----------------
Note 2A
-----------------
Bonds 12.3%
$35,000,000 U.S. Government Zero Coupon due 05/15/19 9,860,200
500,000 Q-Point International 6.00% due 05/01/99 (a) 500,000
-----------------
Total Bonds (Cost $8,358,126) 10,360,200
-----------------
Total Investments
(Cost $41,319,884**) 93.5% 78,823,156
Cash and receivables
in excess of liabilities 6.5% 5,488,546
---------- -----------------
NET ASSETS 100.0% $ 84,311,702
========== =================
</TABLE>
(a) Restricted security ( see note 3)
* Non - income producing
** Cost for Federal Income Tax purposes is the same.
At March 31, 1998, unrealized appreciation of securities for Federal Income Tax
purposes is as follows:
Unrealized appreciation $ 26,881,111
Unrealized depreciation (481,567)
Net unrealized appreciation $ 26,399,544
See Notes to Financial Statement
<TABLE>
<CAPTION>
Portfolio of Investments
The Elite Income Fund
March 31, 1998
(unaudited)
Market Value
Par Value Note 2A
------------------
Bonds 94.3%
-----------------
<S> <C> <C>
U.S. Government Notes and Bonds 54.0%
$ 1,600,000 U.S. Treasury Note
7.875% due 11/15/99 $ 1,655,536
4,220,000 U.S. Treasury Note
6.250% due 02/15/03 4,319,887
3,790,000 U.S. Treasury Bond
7.250% due 05/15/16 4,315,445
------------------
Total U.S. Government Notes and Bonds 10,290,868
------------------
Electric Utilities 11.6%
500,000 Portland General Electric
8.880% due 08/12/99 517,500
520,000 Ohio Power
6.750% due 04/01/03 532,350
500,000 Hawaiian Electric
6.660% due 12/05/05 496,250
650,000 Appalachian Power Co.
6.800% due 03/01/06 666,250
------------------
Total Electric Utility Bonds 2,212,350
------------------
Gas Utilities 9.9%
770, 000 Consumer Energy Co.
8.875% due 11/15/99 799,838
450,000 Entergy Arkansas Inc.
7.000% due 03/01/02 459,563
600,000 Pacific Gas Transmission
7.100% due 06/01/05 624,000
------------------
Total Gas Utilities 1,883,400
------------------
Mortgage Backed Bonds 9.3%
500,000 Fannie Mae (1993-93HA)
6.750% due 01/25/08 509,194
550,000 Federal Home Loan (Mortgage Backed)
6.100% due 02/15/24 549,604
717,481 Donaldson, Lufkin & Jenrette - A
6.500% due 04/25/24 717,173
------------------
Total Mortgage Backed Bonds 1,775,971
------------------
Portfolio of Investments
The Elite Income Fund
March 31, 1998 - Continued
(unaudited)
Market Value
Par Value Note 2A
------------------
- ------------------
Financial/Corporate Bonds 9.5%
700,000 Ford Motor Co.
8.200% due 02/15/02 747,250
450,000 Fannie Mae
6.870% due 06/01/01 450,320
500,000 Federal Home Loan
0.000% due 09/29/17 104,530
500,000 Heller Financial
6.440% due 10/06/02 499,375
------------------
Total Financial/Corporate Bonds 1,801,475
------------------
Total Value Bonds (Cost $17,466,018) 17,964,063
------------------
------------------
Shares
Preferred Stock 1.5%
2,844 Entergy Gulf State Utilities $8.64 287,955
------------------
Total Preferred Stock (cost $295,065) 287,955
------------------
Total Investments
(Cost $17,466,018**) 95.8% 18,252,018
Cash and receivables
in excess of liabilities 4.2% 808,293
------------------
Net Assets $ 19,060,311
==================
</TABLE>
**Cost for Federal Income Tax purposes is the same.
At March 31, 1998, unrealized appreciation (depreciation) of securities for
Federal Income Tax purposes is as follows:
Unrealized appreciation $ 596,532
Unrealized depreciation (105,597)
------------------
Net unrealized depreciation $ 490,935
------------------
See Notes to Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
THE ELITE GROWTH & THE ELITE
INCOME FUND INCOME FUND
------------------------ -----------------
ASSETS:
Investments in securities at value (notes 2A, 3 )
(Cost $57,912,158 and $17,756,861) $ 78,823,156 $ 18,252,018
Cash and cash equivalent (Note 2E) 4,823,088 844,237
Receivables:
Securities sold 615,629 ---
Interest 25,032 331,660
Dividends 47,520 ---
Capital stock sold 285,765 9,111
------------------ ------------------
Total Assets 84,620,190 19,437,026
------------------ ------------------
LIABILITIES:
Payables:
Securities purchased 194,430 ---
Capital stock reacquired 5,009 112,714
Distributions 102,255 260,872
Accrued expenses 6,793 3,129
------------------ ------------------
Total Liabilities 308,488 376,715
------------------ ------------------
NET ASSETS:
The Elite Growth & Income Fund--applicable to
3,408,501 shares outstanding $ 84,311,702
==================
The Elite Income Fund-applicable to 1,863,370
shares outstanding $ 19,060,311
==================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE
(Net assets / shares outstanding)
$ 24.74 $ 10.23
================== ==================
At March 31, 1998 the components of net assets were as follows:
Paid-in capital $ 56,201,713 $ 18,502,222
Accumulated net realized gain on investments 1,711,395 69,804
Undistributed net investment income (950) (2,650)
Net unrealized appreciation (depreciation) 26,399,544 490,935
=================== ===================
Net assets $ 84,311,702 $ 19,060,311
=================== ===================
See Notes to Financial Statements
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 1998
(unaudited)
THE ELITE GROWTH & THE ELITE INCOME
INCOME FUND FUND
---------------------- -------------------
INVESTMENT INCOME:
Income:
<S> <C> <C>
Interest $ 448,962 $ 563,631
Dividends
250,453 12,286
------------------ ------------------
Total Income
699,415 575,917
------------------ ------------------
Expenses:
Investment management fee
360,652 60,554
Transfer agent fees
17,958 7,778
Custodian fees
15,849 4,612
Professional fees (Note 6)
19,939 4,633
Trustees fees and expenses
9,280 2,320
Record keeping services
26,097 6,878
Shareholder reports
3,551 599
Registration fees and other
13,239 10,477
------------------ ------------------
Total Expenses
466,565 97,851
------------------ ------------------
Expenses Paid indirectly (Note 6)
(22,900)
Expenses Reimbursed
--- (17,799)
------------------ ------------------
Net Expenses
443,665 80,052
------------------ ------------------
Net Investment Income
255,751 495,865
------------------ ------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
SECURITIES AND OPTIONS CONTRACT
Net realized gain (loss):
Investment securities 3,580,245 116,128
Expired and closed covered call
options written (Note 4)
(1,868,850) ---
------------------ ------------------
Net realized gain on investment securities
and option contracts 1,711,395 116,128
------------------ ------------------
Net increase (decrease) in unrealized
appreciation of investment securities 6,436,105 260,253
================== ==================
Net increase in net assets
resulting from operations $ 8,403,251 $ 872,246
================== ==================
</TABLE>
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS
THE ELITE
GROWTH & INCOME FUND
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 1998 Sept 30, 1997
------------------ -------------------
OPERATIONS:
<S> <C> <C>
Net investment income $ 255,751 $ 767,877
Net realized gain on investment
securities and options contracts 1,711,395 5,907,320
Net increase (decrease) in unrealized
appreciation of investment securities 6,436,105 9,998,526
------------------ ------------------
Net increase in net assets
resulting from operations 8,403,251 16,673,723
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
(256,701) (751,449)
Distributions from net realized gains on
investment transactions --- (11,069,678)
CAPITAL SHARE TRANSACTIONS:
Increase in net assets resulting from capital
share transactions (a) 8,446,383 18,066,984
------------------ ------------------
Total increase in net assets 16,592,933 22,919,580
NET ASSETS:
Beginning of period 67,718,769 44,799,189
================== ==================
End of period (including undistributed
net investment income of $36,858 and
$14,688 respectively). $ 84,311,702 $ 67,718,769
================== ==================
</TABLE>
(a)Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 1998 September 30,1997
----------------------- -----------------------
Shares Value Shares Value
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Shares sold 496,460 $ 1,392,148 464,160 $ 9,881,155
Shares issued in reinvestment
of distributions 7,102 158,356 563,824 11,716,467
------------ --------------- ------------- ---------------
503,562 5,194,364 1,027,984 21,597,622
Shares redeemed (138,408) (3,104,121) (165,034) ( 3,530,638)
------------ --------------- ------------- ---------------
Net increase 365,155 $ 8,446,383 862,950 $ 18,066,984
============ =============== ============= ===============
</TABLE>
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS
THE ELITE
INCOME FUND
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 1998 Sept. 30, 1997
------------------- -----------------
OPERATIONS:
<S> <C> <C>
Net investment income $ 495,865 $ 848,036
Net realized gain (loss)on investment securities
116,128 4,750
Net increase (decrease) in unrealized
appreciation of investment securities
260,253 (380,175)
------------------- -----------------
Net increase (decrease) in net assets
resulting from operations 872,246 1,232,961
NET EQUALIZATION CREDITS (DEBITS) (NOTE 2d)
--- 19,511
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
(509,331) (872,325)
Distributions from net realized gains on
investment transactions --- ---
CAPITAL SHARE TRANSACTIONS:
Increase in net assets resulting from capital
share transactions (a) 2,385,453 3,313,313
------------------- -----------------
Total increase (decrease) in net assets 2,748,369 3,693,460
NET ASSETS:
Beginning of period 16,311,943 12,618,483
=================== =================
End of period (including undistributed net investment income of $10,816 for
1997).
$ 19,060,311 $ 16,311,943
=================== =================
</TABLE>
(a)Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31,1998 September 30,1997
-------------------------- ---------------------
Shares Value Shares Value
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Shares sold 482,004 $ 4,959,420 545,012 $ 5,376,650
Shares issued in reinvestment
of distributions 23,079 234,944 85,735 842,573
------------ --------------- ------------ ---------------
505,083 5,194,364 630,747 6,219,223
Shares redeemed (273,504) (2,808,911) (296,277) (2,905,910)
------------ --------------- ------------
===============
Net increase 231,579 $ 2,385,453 334,470 $ 3,313,313
============ =============== ============ ===============
</TABLE>
See Notes to Financial Statement
FINANCIAL HIGHLIGHTS
THE ELITE
GROWTH & INCOME FUND
For a share outstanding throughout each period
<TABLE>
<CAPTION>
Years Ended September 30
<S> <C> <C> <C> <C> <C>
*1998 1997 1996 1995 1994
Net asset value, beginning of year $ 22.25 $ 20.55 $16.64 $15.29 $14.44
------------- ----------- ----------- ----------- ------------
Income from investment operations
Net investment income .08 .29 .11 .18 .11
Net gains on securities
(both realized and unrealized) 2.49 6.15 3.92 2.52 1.56
------------- ----------- ----------- ----------- ------------
Total from investment
Operations 2.57 6.44 4.03 2.70 1.67
------------- ----------- ----------- ----------- ------------
Less Distributions
Dividends from net investment
income (.08) (.29) (.12) (.18) (.10)
Distributions from capital gains --- (4.45) --- (1.17) (.72)
------------- ----------- ----------- ----------- ------------
Total distributions (.08) (4.74) (1.35) (.82)
(.12)
------------- ----------- ----------- ----------- ------------
Net asset value, end of year $ 24.74 $ 22.25 $ 20.55 $ 16.64 $ 15.29
============= =========== =========== =========== ============
Total Return 11.58% 34.66% 24.26% 19.92% 11.80%
Ratios/Supplemental Data
Net asset value, end of period
(in 000's) $ 50,160 $ 44,799 $31,182 $25,380 $17,989
Ratio of expenses to average net
assets 1.22%(a) 1.33% 1.42% 1.42% 1.36%
Ratio of net investment income
to average net assets .71%(a)** .61% 1.18% .73% .69%
Portfolio turnover 169.72%(a) 156.93% 137.56% 153.34% 172.00%
Average Brokerage Commissions $ .06 .06 (1) (1) (1)
</TABLE>
*For the six months ending March 31, 1998
**Ratio reflects fees paid through a directed brokerage arrangement. Including
the expenses paid with brokerage commission would have increased the
expense ration to 1.29% and reduced net investment income to 0.64%
(1)Not required information prior to 1996
(a)Annualized
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS
THE ELITE
INCOME FUND
For a share outstanding throughout each period
<TABLE>
<CAPTION>
Years Ended September 30
*1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.00 $ 9.73 $ 10.03 $ 9.48 $ 10.61
------------- ------------ ----------- ------------ -----------
Income from investment operations
Net investment income .28 .60 .60 .62 .61
Net gain (loss) on securities
(both realized and unrealized) .24 .27 (.23) .54 (1.03)
------------- ------------ ----------- ------------ -----------
Total from investment
operations .52 .87 .37 1.16 .42
------------- ------------ ----------- ------------ -----------
Less Distributions
Dividends from net investment
income (.29) (.60) (.62) (.61) (.61)
Distributions from capital gains --- --- (.05) --- (.10)
------------- ------------ ----------- ------------ -----------
Total distributions (.29) (.60) (.67 (.61) (.71)
------------- ------------ ----------- ------------ -----------
Net asset value, end of year $ 10.23 $ 10.00 $ 9.73 $ 10.03 $ 9.48
============= ============ =========== ============ ===========
Total Return 5.23% 9.20% 3.79% 12.56% (4.07%)
Ratios/Supplemental Data
Net asset value, end of period
(in 000's) $ 19,060 $12,618 $12,366 $11,505 $11,751
Ratio of expenses to average
net assets .92%(a)(b) 1.00% 1.12% 1.11% 1.02%
Ratio of net investment income
to average net assets 5.71%(a)(b) 6.01% 6.34% 5.98% 5.66%
Portfolio turnover 13.60%(a) 43.37% 42.24% 40.88% 73.26%
</TABLE>
* For six months ended March 31, 1998
(a) annualized
(b) The manager has elected to reimburse the fund $17,799. Without reimbursement
the expense ratio would have been 1.13% and the net investment income 5.51%. See
Notes to Financial Statement
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
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 non 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's investment objective is to maximize
total returns through an aggressive approach to the equity and debt securities
markets. The Elite Income Fund's 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.
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.
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
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 March 31, 1998, 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> <CAPTION>
Dates of Percent of
<S> <C> <C> <C> <C>
Acquisition Cost Value Net Assets
Stocks
180,000 Atrieva Corporation 08/29/94 $ 216,000 $ 36,000 .04%
35,000 Optiva Corporation 04/25/94 148,750 875,000 1.04%
135,000 Coffee Station, Inc 04/16/96 303,750 202,500 .24%
500,000 Q-Point International 12/08/97 500,000 500,000 .59%
6.000% due 05/01/99
------------- ------------- ----------
============= ============= ==========
Total Restricted $1,168,500 $1,613,500 1.91%
Securities
============= ============= ==========
</TABLE>
Note 4 - Purchases and Sales of Securities
For the six months ending March 31, 1998, purchases and sales of
securities, other than options and short-term notes were as follows:
Purchases Sales
The Elite Growth and Income Fund $ 59,678,425 $ 56,304,828
The Elite Income Fund $ 4,901,185 $ 823,641
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
For The Elite Growth & Income Fund, transactions in covered call options
written were as follows:
<TABLE>
<CAPTION>
Number of
Contracts* Premiums
<S> <C> <C>
Options outstanding at beginning of year 2,860 $ 1,088,662
Options written 10,401 4,695,172
Options terminated in closing purchase transactions (6,301) (2,821,575)
Options exercised --- ---
Options expired (2,120) (951,088)
============ ================
Options outstanding at March 31,1998 4,840 $ 2,011,171
============ ================
</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%, respectively, up to $250
million; .75% and .625%, respectively, over $250 million up to $500 million; and
.5% 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.
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 ending March 31,
1998 were $22,900 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 energy goods and services. The Elite Income Fund has
investments in excess of 10% in electric utilities, gas utilities and financial
