October 30, 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 our
eleventh 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,
avoids excessive risk, and is 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 the opportunity
to review what has happened in the past and what may happen in the future.
Looking back on fiscal 1998, we are disappointed to report that the Growth &
Income Fund was down 4.82% for the year ending September 30. The three, five and
ten year annualized rates of return are now 16.78%, 16.38%, and 14.76%,
respectively.
The decline this year did not come as a surprise. After seven years of
uninterrupted advances we became increasingly concerned that the risk in the
stock market was greater than the potential reward. In April of this year we
mailed to shareholders a sobering letter expressing our concern that the stock
market had as much as 30% risk.
Although the stock market has declined as we expected, we still believe that it
is prudent to be defensive. A review of the portfolio will show that we still
retain approximately 10% in cash and 12% in bonds. Compared to this time last
year, we have more invested in smaller companies, believing they represent the
best value in the stock market. We balance the smaller company's investments
against our larger "core" holdings like Microsoft, General Electric, Merck, and
Federal National Mortgage (Fannie Mae).
The Elite Income Fund
(bond fund)
The bond market has been the main beneficiary of the turmoil that plagued the
stock market. As worldwide investors looked for safety, they poured a
significant amount of capital into bonds. The result was higher bond prices and
lower interest rates. For the fiscal year, the bond fund was up 13.44%. The
three, five, and ten year annualized rates of return are 8.74%, 6.78%, and
8.04%, respectively.
Bond fund investors are going to have to understand that the entire level of
interest rates has declined. Looking forward it is going to be difficult to
achieve the same type of return that has been achieved in the past.
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 9/30/88, which gives a ten-year record.
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 there is only one index (stocks or bonds)
that accurately reflects how the Elite Funds are managed. 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,
Richard S. McCormick
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, 1998, 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, 1998 by correspondence with the custodian and brokers. 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, 1998,
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 21, 1998
<TABLE>
<CAPTION>
THE FOLLOW DATA IS THE NUMERIC REPRESENTAION OF THE BENCHMARK COMPARATIVE GRAPH
PRESENTED IN THE ANNUAL REPORT TO SHAREHOLDERS.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sep-88 Sep-89 Sep-90 Sep-91 Sep-92 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98
Elite Income Fund $21,722 10,000 10,920 11,678 13,161 14,302 15,648 15,011 16,896 17,535 19,148 21,722
Lehman Intermediate Govt. Index $22,352 10,000 10,962 11,903 13,521 15,206 16,368 16,122 17,831 18,741 20,208 22,352
Lehman Short-Term Govt. Index $20,375 10,000 10,889 11,904 13,244 14,557 15,276 15,452 16,717 17,663 18,878 20,375
Sep-88 Sep-89 Sep-90 Sep-91 Sep-92 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98
Elite Growth & Income Fund $39,604 10,000 13,078 11,519 15,198 16,337 18,549 20,737 24,868 30,900 41,610 39,604
Standard & Poors 500 Index $49,155 10,000 13,293 12,070 15,815 17,558 19,835 20,565 26,675 32,096 45,076 49,155
Lipper Growth & Income Fund Index $36,880 10,000 12,577 11,047 14,282 15,684 18,187 18,709 23,027 27,068 36,902 36,880
</TABLE>
Portfolio of Investments
The Elite Growth & Income Fund
September 30, 1998
<TABLE>
Market Value
Shares Note 2A
- ------ -----------
Common Stock 79.3%
Capital Goods 23.1%
<S> <C> <C>
180,000 Atrieva Inc. * (a) ........................... $ 36,000
80,000 C-Cube Corporation* .......................... 1,395,000
80,000 Cable Design Technologies* ................... 1,020,000
30,000 Cisco Systems* ............................... 1,854,375
24,000 General Electric ............................. 1,909,500
24,000 Hewlett-Packard .............................. 1,270,500
16,000 I.B.M. Corporation ........................... 2,048,000
30,000 Microsoft Corporation* ....................... 3,301,875
20,000 SBS Technologies* ............................ 491,250
20,000 Thomas & Betts ............................... 761,250
80,000 U.S. Filter* ................................. 1,280,000
16,000 Xerox Corporation ............................ 1,356,000
-----------
Total Capital Goods .......................... 16,723,750
-----------
Consumer Goods & Services 18.0%
75,000 Budget Group* ................................ 1,710,938
135,000 Coffee Station, Inc* (a) ..................... 168,750
80,000 Eagle Hardware & Garden* ..................... 1,720,000
34,000 FDX Corporation* ............................. 1,534,250
24,000 H.R. Block ................................... 993,000
30,000 Limited, Inc. ................................ 658,125
35,000 Optiva * (a) ................................. 1,575,000
30,000 Promus Hotel* ................................ 826,875
40,000 Starbucks* ................................... 1,450,000
50,000 Sherwin Williams ............................. 1,081,250
50,000 Zale Corporation* ............................ 1,281,250
-----------
Total Consumer Goods & Services .............. 12,999,438
-----------
Financial Intermediaries 13.3%
48,000 A.C.E Limited (Insurance) .................... 1,440,000
30,000 Conseco Incorporated ......................... 916,875
36,000 Fannie Mae ................................... 2,313,000
30,000 Freddie Mac .................................. 1,483,125
32,000 Mellon Bank, Inc. ............................ 1,762,000
50,000 Washington Mutual ............................ 1,678,125
-----------
Total Financial Intermediaries ............... 9,593,125
-----------
Health Care Goods & Services 11.3%
32,000 American Home Products ....................... 1,676,000
16,000 Merck & Co. .................................. 2,073,000
30,000 Pathogenesis* ................................ 997,500
15,000 Pfizer, Inc. ................................. 1,589,062
45,000 Sierra Health Services* ...................... 885,938
150,000 Sun Healthcare Group* ........................ 975,000
-----------
Total Health Care Goods & Services ........... 8,196,500
-----------
</TABLE>
See Notes to Financial Statements
Portfolio of Investments
The Elite Growth & Income Fund
September 30, 1998- Continued
<TABLE>
Market Value
Shares Note 2A
------ -------
Energy 10.9%
<S> <C>
150,000 EEX Corporation* ......................... $ 731,250
25,000 Kerr McGee ............................... 1,137,500
220,000 Ocean Energy* ............................ 2,887,500
90,000 Petroleum Geo Services* .................. 1,428,750
80,000 Tidewater Incorporated ................... 1,660,000
----------
Total Energy ............................. 7,845,000
----------
Basic Goods 2.7%
280,000 National Steel ........................... 1,960,000
----------
Total Basic Goods ........................ 1,960,000
----------
</TABLE>
Total Value of Common Stock (Cost $44,774,075) 57,317,813
<TABLE>
Options - Covered Calls ( 1.8%)
--------------------------------
<S> <C> <C> <C> <C>
30,000 Cisco Systems ....... ( $50.00 01-15-99) (442,500)
30,000 Microsoft ........... ( $90.00 01-15-99) (716,250)
15,000 Pfizer .............. ( $120.00 01-15-99) (59,063)
40,000 Starbucks ........... ( $45.00 01-15-99) (57,500)
16,000 Xerox ............... ( $110.00 01-15-99) (25,000)
----------
Total Value of Calls (Cost $2,114,503) (1,300,313)
----------
</TABLE>
<TABLE>
<S> ---------------------
Par Value
- ---------
Bonds 12.2%
<C> <C> <C> <C>
$25,000,000 U.S. Government Zero Coupon due 05/15/19 ......... 8,289,865
500,000 Q-Point International 6.00% due 05/01/99 (a) ..... 500,000
----------
Total Value of Bonds (Cost $6,097,681) ........... 8,789,865
----------
</TABLE>
<TABLE>
Total Investments
<S> <C> <C>
(Cost $48,757,253**) ........................ 89.7% 64,807,365
Cash and receivables
in excess of liabilities ................ 10.3% 7,463,342
-----------
NET ASSETS .................................. 100.0% $72,270,707
===== ===========
===========
</TABLE>
(a) Restricted security ( see note 3)
* Non - income producing
** Cost for Federal Income Tax purposes is the same.
At September 30, 1998, unrealized appreciation of securities for Federal Income
Tax purposes is as follows:
Unrealized appreciation $ 23,011,261
Unrealized depreciation (6,961,149)
------------------
Net unrealized appreciation $ 16,050,112
See Notes to Financial Statements
Portfolio of Investments
The Elite Income Fund
September 30,1998
<TABLE>
Market Value
Par Value Note 2A
- ---------
Bonds 95.1%
U.S. Government Notes and Bonds 62.0%
------------------------------- -----
<S><C>
1,150,000 U.S. Treasury Note
7.875% due 11/15/99 $ 1,191,800
3,870,000 U.S. Treasury Note
6.250% due 02/15/03 4,158,827
6,700,000 U.S. Treasury Note
7.875% due 11/15/04 7,936,983
4,690,000 U.S. Treasury Bond
7.250% due 05/15/16 5,824,719
----------------------
Total U.S. Government Notes and Bonds 19,112,329
</TABLE>
<TABLE>
----------------------
Electric Utilities 8.9%
<S> <C>
945,000 Niagara Mohawk Power
5.875% due 09/01/02 953,269
520,000 Ohio Power
6.750% due 04/01/03 556,400
500,000 Hawaiian Electric
6.660% due 12/05/05 530,625
650,000 Appalachian Power Co.
6.800% due 03/01/06 707,687
----------------------
Total Electric Utilities 2,747,981
</TABLE>
<TABLE>
----------------------
Gas Utilities 4.1%
<S> <C>
450,000 Entergy Arkansas Inc.
7.000% due 03/01/02 475,312
715,000 Pacific Gas Transmission
7.100% due 06/01/05 788,288
----------------------
Total Gas Utilities 1,263,600
</TABLE>
<TABLE>
----------------------
Mortgage Backed 4.6%
<S> <C> <C>
500,000 Fannie Mae (1993-93HA)
6.750% due 01/25/08 516,780
550,000 Federal Home Loan (Mortgage Backed)
6.100% due 02/15/24 558,503
337,394 Donaldson, Lufkin & Jenrette - A
6.500% due 04/25/24 337,596
----------------------
Total Mortgage Backed 1,412,879
</TABLE>
See Notes to Financial Statements
Portfolio of Investments
The Elite Income Fund
September 30, 1998- Continued
<TABLE>
Par Value Note 2A
--------- -------
Financial/Corporate Bonds 15.5%
<S> <C>
150,000 GMAC
9.375% due 04/01/00 $ 159,375
500,000 Heller Financial
6.500% due 05/15/00 509,375
250,000 Fannie Mae
6.375% due 10/13/00 250,092
625,000 Chrysler Financial
5.875% due 02/07/01 637,500
760,000 GMAC
6.875% due 07/15/01 796,100
700,000 Ford Motor Credit
8.200% due 02/15/02 768,250
500,000 Heller Financial
6.440% due 10/06/02 518,125
500,000 Ford Motor Credit
6.375% due 12/15/05 526,875
500,000 Freddie Mac
7.270% due 04/07/06 505,151
500,000 Freddie Mac
0.000% due 09/29/17 114,596
----------------------
Total Financial/Corporate Bonds 4,785,439
----------------------
Total Value Bonds (Cost $27,374,836) 29,322,228
----------------------
----------------------
</TABLE>
<TABLE>
Shares
Preferred Stock 0.7%
<S> <C> <C> <C>
2,123 Entergy Gulf State Utilities $8.64 216,546
----------------------
Total Value of Preferred Stock (Cost $220,261) 216,546
----------------------
Total Investments
(Cost 95.8% 29,538,774
$27,595,097**)
Cash and receivables
in excess of 4.2% 1,302,077
liabilities
------------ ----------------------
NET 100.0% $ 30,840,851
ASSETS
============ ======================
** Cost for Federal Income Tax purposes is the same.
At September 30, 1998, unrealized appreciation (depreciation) of securities
for Federal Income Tax purposes is as follows:
Unrealized appreciation $ 1,954,930
Unrealized depreciation
(11,253)
=================
Net unrealized appreciation $ 1,943,677
=================
</TABLE>
See Notes to Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998
<TABLE>
THE ELITE
GROWTH & INCOME THE ELITE INCOME
FUND FUND
------------ -----------
ASSETS:
<S> <C> <C>
Investments in securities at value (Notes 2A, 3 )
(Cost $48,757,253 and $27,595,097) .............................. $ 64,807,365 $29,538,774
Cash and cash equivalent (Note 2E) .................................... 8,438,755 794,844
Receivables:
Interest ......................................................... 63,305 556,982
Dividends ........................................................ 45,560 --
------------ -----------
Total Assets ..................................................... 73,354,985 30,890,600
------------ -----------
LIABILITIES:
Payables:
Investment securities purchased ................................. 1,029,644 --
Capital stock reacquired ......................................... 38,390 --
Distributions .................................................... 15,207 46,225
Accrued expenses ................................................. 1,037 3,524
------------ -----------
Total Liabilities ................................................ 1,084,278 49,749
------------ -----------
NET ASSETS:
The Elite Growth & Income Fund--applicable to
3,438,393 shares outstanding ........................................ $ 72,270,707
===========
The Elite Income Fund-applicable to 2,875,973
shares outstanding .................................................. $ 30,840,851
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net assets / shares outstanding)
$ 21.02 $ 10.72
============ ===========
At September 30, 1998 the components of net
assets were as follows:
Paid-in capital ....................................................... $ 57,334,056 $28,869,471
Accumulated net realized gain (loss) .................................. (1,150,223) 3,159
Undistributed net investment income ................................... 36,762 24,544
Net unrealized appreciation .......................................... 16,050,112 1,943,677
============ ===========
Net Assets ....................................................... $ 72,270,707 $30,840,851
============ ===========
See Notes to Financial Statements
</TABLE>
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1998
<TABLE>
THE ELITE THE ELITE
GROWTH & INCOME INCOME FUND
FUND
----------- -----------
INVESTMENT INCOME:
Income:
<S> <C> <C>
Interest .................................................... $ 967,561 $ 1,359,904
Dividends ................................................... 523,850 24,572
----------- -----------
Total Income ............................................ 1,491,411 1,384,476
----------- -----------
Expenses:
Investment management fee ................................... 766,910 147,936
Transfer agent fees ......................................... 29,043 18,940
Custodian fees .............................................. 35,242 10,533
Professional fees (Note 6) .................................. 16,133 4,633
Trustees fees and expenses .................................. 18,280 5,320
Record keeping services ..................................... 57,462 1,216,615
Shareholder reports ......................................... 5,266 845
Registration fees and other ................................. 17,875 9,743
----------- -----------
Total Expenses .......................................... 946,211 214,565
----------- -----------
Fees paid indirectly (Note 6) .................................... (60,647) --
Fees paid by manager (Note 5) ................................... -- (20,597)
Net Expenses ............................................ 885,564 193,968
----------- -----------
Net Investment Income ................................... 605,847 1,190,508
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES AND OPTIONS CONTRACT
Net realized gain (loss):
Investment securities ............................................ (149,111) 49,483
Expired and closed covered call
options written (Note 4) ....................................... (1,001,112) --
----------- -----------
Net realized gain (loss) on
investment securities and option ............................... (1,150,223) 49,483
contracts
----------- -----------
Net increase (decrease) in unrealized appreciation of
investment securities .......................................... (3,913,327) 1,712,996
=========== ===========
Net increase (decrease) in net assets resulting from
operations ..................................................... $(4,457,703) $ 2,952,987
=========== ===========
See Notes to Financial Statements
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
THE ELITE
GROWTH & INCOME FUND
For the Years Ended September 30
<TABLE>
1998 1997
---- ----
OPERATIONS:
<S> <C> <C>
Net investment income ............................... $ 605,847 $ 767,877
Net realized gain (loss) on investment
securities and options contracts .................. (1,150,223) 5,907,320
Net increase (decrease) in unrealized appreciation of
investment securities .............................. (3,913,327) 9,998,526
------------ ------------
Net increase (decrease) in net assets resulting from
operations ......................................... (4,457,703) 16,673,723
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income ............ (569,085) (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) ......................................... 9,578,726 18,066,984
------------ ------------
Total increase in net assets .................... 4,551,938 22,919,580
NET ASSETS:
Beginning of year ................................... 67,718,769 44,799,189
============ ============
End of year (including undistributed
net investment income of $36,762 and
$ -0- respectively) .............................. $ 72,270,707 $ 67,718,769
============ ============
</TABLE>
<TABLE>
(a)Transactions in capital stock were as follows:
Year Ended September Year Ended
30,1998 September 30,1997
----------------------------- ---------------------------
Shares Value Shares Value
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold ......................... 868,755 $ 20,261,676 464,160 $ 9,881,155
Shares issued in reinvestment
of distributions .................. 23,665 537,450 563,824 11,716,467
----------- ------------ ----------- ------------
892,420 20,799,126 1,027,984 21,597,622
Shares redeemed ..................... (11,220,400) (165,034) (3,530,638)
(497,374)
----------- ------------ ----------- ------------
Net increase ................... 395,046 $ 9,578,726 862,950 $ 18,066,984
=========== ============ =========== ============
See Notes to Financial Statements
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
THE ELITE
INCOME FUND
For the Years Ended September 30
<TABLE>
1998 1997
------------ ------------
OPERATIONS:
<S> <C> <C>
Net investment income ....................... $ 1,190,508 $ 848,036
Net realized gain on investment securities .. 49,483 4,750
Net increase in unrealized
appreciation of investment securities ..... 1,712,996 380,175
------------ ------------
Net increase in net assets resulting from
Operations ............................... 2,952,987 1,232,961
NET EQUALIZATION CREDITS (NOTE 2D) ............... 108,697 19,511
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income .... (1,285,477) (872,325)
CAPITAL SHARE TRANSACTIONS:
Increase in net assets resulting from capital
share transactions (a) .................... 12,752,701 3,313,313
------------ ------------
Total increase in net assets ............ 14,528,908 3,693,460
NET ASSETS:
Beginning of year ........................... 16,311,943 12,618,483
============ ============
End of year (including undistributed net
investment income of $24,544 and $10,816
respectively) ........................... $ 30,840,851 $ 16,311,943
============ ============
</TABLE>
<TABLE>
(a)Transactions in capital stock were as follows:
Year Ended Year Ended
September 30,1998 September 30,1997
-------------------------------- ---------------------------
Shares Value Shares Value
----------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Shares sold ........................................ 1,603,301 $ 16,408,068 545,012 $ 5,376,650
Shares issued in reinvestment
of distributions ............................... 109,272 1,135,100 85,735 842,573
----------- ------------ ---------- -----------
1,712,573 17,543,168 630,747 6,219,223
Shares redeemed .................................... (468,391) (4,790,467) (296,277) (2,905,910)
----------- ------------ ---------- -----------
Net increase ...................................... 1,244,182 $ 12,752,701 334,470 3,313,313
=========== ============ ========== ===========
See Notes to Financial Statements
</TABLE>
FINANCIAL HIGHLIGHTS
THE ELITE
GROWTH & INCOME FUND
For a share outstanding throughout each year
<TABLE>
Years Ended September 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 22.25 $ 20.55 $ 16.64 $ 15.29 $ 14.44
------ ------ ------ ------ ------
Income from investment operations
Net investment income .18 .29 .11 .18 .11
Net gain (loss) on securities
(both realized and unrealized) (1.24) 6.15 3.92 2.52 1.56
------ ------ ------ ------ ------
Total from investment
operations (1.06) 6.44 4.03 2.70 1.67
------ ------ ------ ------ ------
Less Distributions
Dividends from net investment
income (.17) (.29) (.12) (.18) (.10)
Distributions from capital gains --- (4.45) --- (1.17) (.72)
------ ------ ------ ------ ------
Total distributions (.17) (4.74) (.12) (1.35) (.82)
------ ------ ------ ------ ------
Net asset value, end of year $ 21.02 $ 22.25 $ 20.55 $ 16.64 $ 15.29
====== ====== ====== ====== ======
Total Return (4.82%) 34.66% 24.26% 19.92% 11.80%
</TABLE>
<TABLE>
Ratios/Supplemental Data
Net asset value, end of year
<S> <C> <C> <C> <C> <C>
(in 000's) $ 72,271 $ 67,719 $ 44,799 $ 31,182 $ 25,380
Ratio of expenses to average net
assets 1.23%* 1.30%* 1.42%* 1.42%
1.33%
Ratio of net investment income
To average net assets .71% 1.41% 1.18% .73%
.61%
Portfolio turnover 138.49% 115.80% 156.93% 137.56% 153.34%
</TABLE>
*Ratio reflects fees paid through a directed brokerage arrangement. Expense
ratio for 1994 excludes these payments. No fees were paid through a brokerage
arrangement for 1996. The expense ratios for 1998, 1997 and 1995 after reduction
of fees paid through the directed brokerage arrangement were 1.15%, 1.27% and
1.35%, respectively.
See Notes to Financial Statements
FINANCIAL HIGHLIGHTS
THE ELITE
INCOME FUND
For a share outstanding throughout each year
<TABLE>
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 .......... .59 .60 .60 .62 .61
Net gain (loss) on securities
(both realized and unrealized) . .72 .27 (.23 .54 (1.03)
------ ------ ------ ------ ------
Total from investment
operations ................ 1.31 .87 .37 1.16 (.42)
------ ------ ------ ------ ------
Less Distributions
Dividends from net investment
income ......................... (.59) (.60) (.62) (.61) (.61)
Distributions from capital gains -- -- (.05) -- (.10)
------ ------ ------ ------ ------
Total distributions ........ (.59) (.60) (.67) (.61) (.71)
------ ------ ------ ------ ------
Net asset value, end of year ..... $ 10.72 $ 10.00 $ 9.73 $ 10.03 $ 9.48
====== ====== ====== ====== ======
Total Return ............... 13.44% 9.20% 3.79% 12.56% (4.07%)
</TABLE>
<TABLE>
Ratios/Supplemental Data
Net asset value, end of year
<S> <C> <C> <C> <C> <C>
(in 000's) ................. $ 30,841 $ 16,312 $ 12,618 $ 12,366 $ 11,505
Ratio of expenses to average
net assets ................. .92% .96% 1.00% 1.12%* 1.11%
Ratio of net investment income
to average net assets ...... 5.63% 6.01% 6.01% 6.34% 5.98%
Portfolio turnover ............. 21.41% 37.60% 42.24% 40.88% 43.37%
</TABLE>
* Ratio reflects fees paid though a directed brokerage arrangement. Expense
ratio for 1994 excludes these payments. No fees were paid through a directed
brokerage arrangement for 1998, 1997 or 1996. Expense ratio for 1995 after
reduction of fees paid through the directed brokerage arrangement was 1.08%
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
September 30,1998
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 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'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.
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.
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
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, 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>
Dates of Percentage of
Acquisition Cost Value Net Assets
Stocks
<S> <C> <C> <C> <C> <C>
180,000 Atrieva Corporation ............................. 08/29/94 $ 216,000 $ 36,000 .05%
35,000 Optiva Corporation .............................. 04/25/94 148,750 1,575,000 2.18%
135,000 Coffee Station, Inc ............................. 04/16/96 303,750 168,750 .23%
------- ------- ----
668,500 1,779,750 2.46%
Bonds
$ 500,000 Q Point Intl. 6% 5/1/99 ......................... 10/27/97 500,000 500,000 .69%
---------- ---------- ----
========== ========== ====
Total ................................................... $1,168,500 $2,279,750 3.15%
========== ========== ====
</TABLE>
Note 4 - Purchases and Sales of Securities
For the year ended September 30, 1998, purchases and sales of securities,
other than options and short-term notes were as follows:
<TABLE>
Purchases Sales
--------- -----
<S> <C> <C>
The Elite Growth and Income Fund $102,300,193 $98,987,400
The Elite Income Fund $16,616,540 $4,317,874
</TABLE>
For The Elite Growth & Income Fund, transactions in covered call options
written were as follows:
<TABLE>
Number of
Contracts* Premiums
---------- --------
<S> <C> <C>
Options outstanding at beginning of year ........................ 2,860 $ 1,088,662
Options written ................................................. 14,041 8,599,906
Options terminated in closing purchase transactions ............. (12,861) (6,832,116)
Options exercised ............................................... -- --
Options expired ................................................. (2,730) (741,949)
======= ===========
Options outstanding at September 30,1998 ........................ 1,310 $ 2,114,503
======= ===========
</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, 1998
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, 1998 were $60,647 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, health care goods and services, and
energy industries. The Elite Income Fund has investments in excess of 10%
in the financial industry.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799196
<NAME> THE ELITE GROUP OF MUTUAL FUNDS
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<NAME> THE ELITE GROWTH AND INCOME FUND
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<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1998
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<INVESTMENTS-AT-COST> 48,757,253
<INVESTMENTS-AT-VALUE> 64,807,365
<RECEIVABLES> 108,865
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 8,438,755
<TOTAL-ASSETS> 73,354,985
<PAYABLE-FOR-SECURITIES> 1,029,644
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 54,634
<TOTAL-LIABILITIES> 1,084,278
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57,334,056
<SHARES-COMMON-STOCK> 3,438,393
<SHARES-COMMON-PRIOR> 3,043,347
<ACCUMULATED-NII-CURRENT> 36,762
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,150,223)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,050,112
<NET-ASSETS> 72,270,707
<DIVIDEND-INCOME> 523,850
<INTEREST-INCOME> 967,561
<OTHER-INCOME> 0
<EXPENSES-NET> 885,564
<NET-INVESTMENT-INCOME> 605,847
<REALIZED-GAINS-CURRENT> (1,150,223)
<APPREC-INCREASE-CURRENT> (3,913,327)
<NET-CHANGE-FROM-OPS> (4,457,703)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (569,085)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 868,755
<NUMBER-OF-SHARES-REDEEMED> (497,374)
<SHARES-REINVESTED> 23,665
<NET-CHANGE-IN-ASSETS> 4,551,938
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 766,910
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 946,211
<AVERAGE-NET-ASSETS> 72,271,000
<PER-SHARE-NAV-BEGIN> 22.25
<PER-SHARE-NII> 0.18
<PER-SHARE-GAIN-APPREC> (1.24)
<PER-SHARE-DIVIDEND> (0.17)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 21.02
<EXPENSE-RATIO> 1.23
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799196
<NAME> THE ELITE INCOME FUND
<SERIES>
<NUMBER> 02
<NAME> THE ELITE GROUP OF MUTUAL FUNDS
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 27,595,097
<INVESTMENTS-AT-VALUE> 29,538,774
<RECEIVABLES> 556,982
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 794,844
<TOTAL-ASSETS> 30,890,600
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49,749
<TOTAL-LIABILITIES> 49,749
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 28,869,471
<SHARES-COMMON-STOCK> 2,875,973
<SHARES-COMMON-PRIOR> 1,631,791
<ACCUMULATED-NII-CURRENT> 24,544
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,159
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,943,677
<NET-ASSETS> 30,840,851
<DIVIDEND-INCOME> 24,572
<INTEREST-INCOME> 1,359,904
<OTHER-INCOME> 0
<EXPENSES-NET> 193,968
<NET-INVESTMENT-INCOME> 1,190,508
<REALIZED-GAINS-CURRENT> 49,483
<APPREC-INCREASE-CURRENT> 1,712,996
<NET-CHANGE-FROM-OPS> 2,952,987
<EQUALIZATION> 108,697
<DISTRIBUTIONS-OF-INCOME> (1,285,477)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,603,301
<NUMBER-OF-SHARES-REDEEMED> (468,391)
<SHARES-REINVESTED> 109,272
<NET-CHANGE-IN-ASSETS> 14,528,908
<ACCUMULATED-NII-PRIOR> 10,816
<ACCUMULATED-GAINS-PRIOR> (46,324)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 147,936
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 214,565
<AVERAGE-NET-ASSETS> 30,841,000
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.59
<PER-SHARE-GAIN-APPREC> 0.72
<PER-SHARE-DIVIDEND> (0.59)
<PER-SHARE-DISTRIBUTIONS> 0.00
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<PER-SHARE-NAV-END> 10.72
<EXPENSE-RATIO> 0.92
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
