<PAGE> 1
ANNUAL REPORT
September 30, 1999
<PAGE> 2
September 30, 1999
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
twelfth 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.
The Elite Growth & Income Fund
The financial statements that make up the Annual Report give us the opportunity
to review what has happened and what may happen in the future. Looking back on
fiscal 1999, the Growth & Income Fund was up 7.61% for the year ending September
30. The three, five, and ten year annualized rates of return are now 11.31%,
15.50%, and 12.54% respectively.
We are not surprised that profits in the stock market are becoming harder and
harder to come by. Two-thirds of all stocks are down for the year and the
popular stock averages are being propelled up by a handful of large companies
that have become increasingly expensive when compared to smaller companies. This
disparity has created a "have's" and "have-not's" situation. The small companies
continue to hurt our performance, but they represent the best value in the
market and the best opportunity to achieve capital appreciation.
The Elite Income Fund
One year ago, investors looking for safety from worldwide economic turmoil
poured billions into U.S. Treasury Bonds pushing prices up and the yield down on
the 30 year Treasury bond below 5%. One year later the Federal Reserve now
believes the international crisis has passed and the enemy is inflation. As a
result, they have pushed interest rates higher and bond prices lower. The net
effect on our bond Income Fund was a return for the last twelve months of
- -1.57%. The three, five, and ten year annualized rates of return are 6.83%,
7.33%, and 6.95% respectively.
Looking forward, we see the possibility that interest rates could move slightly
higher as the Federal Reserve attempts to give inflation a knockout blow. Beyond
that we believe the bond fund will continue to preserve your capital and deliver
returns better than money market funds and CD's.
Performance Comparisons
On the following pages are two charts that show the growth in value of a
hypothetical $10,000 investment in the Elite Growth & Income Fund, the Elite
Income Fund and various indices. The chart starts on 9/30/89, 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 that there is only one index (stock or
bond) 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.
Warm Regards,
Richard McCormick
<PAGE> 3
<TABLE>
<CAPTION>
THE FOLLOWING DATA IS A NIMERIC REPRESENTATION OF THE BENCHMARK COMARITIVE GRAPH
PRESENTED IN THE ANNUAL REPORT TO SHAREHOLDERS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C> 9/89 9/90 9/91 9/92 9/93 9/94
9/95 9/96 9/97 9/98 9/99
Elite Income Fund $19,579 10,000 10,694 12,052 13,097 14,329 13,746 15,473 16,058 17,535 19,892 19,579
Lehman Intermediate Govt. Index $20,499 10,000 10,858 12,335 13,872 14,931 14,707 16,266 17,096 18,435 20,391 20,499
Lehman Short-Term Govt. Index $19,163 10,000 10,932 12,163 13,368 14,029 14,190 15,352 16,221 17,337 18,712 19,163
9/89 9/90 9/91 9/92 9/93 9/94 9/95
9/96 9/97 9/98 9/99
Elite Growth & Income Fund $32,588 10,000 8,808 11,620 12,492 14,183 15,857 19,016 23,628 31,817 30,284 32,588
Standard & Poors 500 Index $47,258 10,000 9,080 11,898 13,209 14,922 15,471 20,067 24,145 33,909 36,978 47,258
Lipper G & I Fund Index $36,740 10,000 8,783 11,356 12,471 14,461 14,876 18,309 21,523 29,342 29,324 36,740
</TABLE>
<PAGE> 4
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, 1999, 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, 1999 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, 1999,
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 20, 1999
<PAGE> 5
Portfolio of Investments
The Elite Growth & Income Fund
September 30, 1999
<TABLE>
<CAPTION>
Market Value
Shares Note 2A
---------- ----------
Common Stock 92.1%
Business Services 11.9%
<S> <C> <C> <C>
100,000 Cendant Corporation* $1,775,000
50,000 Equifax Incorporated 1,406,250
40,000 FDX Corporation* (Federal Express) 1,550,000
40,000 H.R. Block 1,737,500
42,000 Harcourt General 1,748,250
----------
Total Business Services 8,217,000
----------
Capital Goods 14.5%
40,000 Black & Decker 1,827,500
55,600 Dura Automotive* 1,337,875
24,000 General Electric 2,845,500
60,000 Goodrich Incorporated 1,740,000
22,000 Tyco International 2,271,500
----------
Total Capital Goods 10,022,375
----------
Consumer Goods & Services 20.1%
135,000 Coffee Station, Inc* (a)
135,000
50,000 Foodmaker* 1,246,875
55,000 Fortune Brands 1,773,750
16,000 Gateway Computer* 711,000
30,000 Limited, Inc. 1,147,500
40,000 Mens Warehouse* 860,000
100,000 Nabisco Group Holdings 1,500,000
40,000 New York Times 1,500,000
105,139 Optiva* (a) 1,182,814
60,000 Starbucks* 1,486,875
60,000 Zale Corporation* 2,298,750
----------
Total Consumer Goods & Services 13,842,564
----------
Energy 4.5%
Petroleum Geo Services*
80,000 1,525,000
Pogo Producing
50,000 1,037,500
Tidewater Incorporated
20,000 510,000
----------
Total Energy 3,072,500
----------
Financial Intermediaries 12.3%
32,000 Fannie Mae 2,006,000
60,000 Freddie Mac
3,120,000
60,000 Mellon Bank, Inc.
2,025,000
80,000 Ohio Casualty 1,350,000
----------
Total Financial Intermediaries 8,501,000
----------
Health Care Goods & Services 10.5%
20,000 American Home Products
830,000
40,000 Elan PLC/ADR* 1,342,500
30,000 Merck and Company
1,944,375
45,000 Pfizer Inc.
1,617,188
50,000 Watson Pharmaceutical* 1,528,125
-----------
Total Health Care Goods & Services
7,262,188
-----------
</TABLE>
See Notes to Financial Statements
<PAGE> 6
Portfolio of Investments
The Elite Growth & Income Fund
September 30, 1999 - Continued
<TABLE>
<CAPTION>
Market Value
Shares Note 2A
---------- -----------
Technology & Telecommunications 18.3%
<S> <C> <C> <C>
16,000 GTE Corporation $1,230,000
24,000 Hewlett Packard 2,208,000
24,000 I.B.M. Corporation 2,913,000
32,000 Microsoft Corporation* 2,898,000
60,000 Shaw Communications 1,653,750
40,000 Xerox Corporation 1,677,500
-----------
Total Health Care Goods & Services 12,580,250
Total Health Care Goods & Services
Total Health Care Goods & Services
-----------
Total Value of Common Stock (Cost 63,497,877
$43,112,605)
-----------
Options - Covered Calls ( 0.7%)
20,000 FDX Corporation $ 60.00 01-21-00 (6,250)
20,000 FDX Corporation $ 47.50 01-21-00 (26,875)
12,000 Hewlett Packard $120.00 11-19-99 (5,250)
12,000 Hewlett Packard $100.00 11-19-99 (40,500)
12,000 IBM $140.00 01-21-00 (53,250)
20,000 Microsoft $ 85.00 01-21-00 (228,750)
40,000 New York Times $ 40.00 01-21-00 (77,500)
40,000 Petroleum Geo Services $ 25.00 11-19-99 (5,000)
60,000 Starbucks $ 40.00 01-21-00 (18,750)
20,000 Tidewater $ 35.00 01-21-00 (10,625)
-----------
Total Value of Calls (Cost ($1,400,027)) (472,750)
-----------
Convertible Securities 2.3%
90,000 Glenborough Reality Preferred A. 1,479,375
5,000 Apartment Investment & Management Preferred K. 120,000
-----------
</TABLE>
<TABLE>
<S> <C> <C>
Total Value of Preferred Stock (Cost
$1,784,472) 1,599,375
------------
Total Investments
(Cost $43,497,050**) 93.7% 64,624,502
Cash and receivables
In excess of liabilities 6.3% 4,322,986
------ ------------
NET ASSETS 100.0% $68,947,488
====== ============
<FN>
(a) Restricted security (see note 3)
* Non - income producing
** Cost for Federal Income Tax purposes is the same.
At September 30, 1999, unrealized appreciation (depreciation) of securities
for Federal Income
Tax purposes is as follows:
Unrealized $ 23,762,027
appreciation
Unrealized
depreciation (2,634,575)
==============
Net unrealized $ 21,127,452
appreciation ==============
</FN>
</TABLE>
See Notes to Financial Statements
<PAGE> 7
Portfolio of Investments
The Elite Income Fund
September 30, 1999
<TABLE>
<CAPTION>
Market Value
Par Value Note 2A
----------
<S> <C> <C> <C>
Bonds 95.9%
U.S. Government Notes and Bonds 52.3%
$5,870,000 U.S. Treasury Note
6.250% due 02/15/03 $5,947,543
1,530,000 U.S. Treasury Note
7.875% due 11/15/04 1,657,985
5,490,000 U.S. Treasury Bond
7.250% due 05/15/16 5,935,678
----------
Total U.S. Government Notes and Bonds 13,541,206
----------
Electric & Gas Utilities 22.5%
450,000 Entergy Arkansas Inc.
7.000% due 03/01/02 452,250
1,485,000 Niagara Mohawk Power
5.875% due 09/01/02 1,446,019
150,000 Detroit Edison
7.400% due 01/15/03 152,063
520,000 Ohio Power
6.750% due 04/01/03 516,100
715,000 PG&E Gas Transmission NW Co.
7.100% due 06/01/05 724,831
500,000 Hawaiian Electric
6.660% due 12/05/05 488,125
650,000 Appalachian Power Co.
6.800% due 03/01/06 635,375
1,500,000 Kentucky Power
6.450% due 11/10/08 1,406,250
----------
Total Electric & Gas Utility Bonds 5,821,013
----------
Mortgage Backed Bonds 3.9%
500,000 Fannie Mae (1993-93HA)
6.750% due 01/25/08 499,650
515,201 Federal Home Loan
6.100% due 02/15/24 514,443
----------
Total Mortgage Backed Bonds 1,014,093
----------
Financial/Corporate Bonds 17.2%
150,000 GMAC
9.375% due 04/01/00 152,603
500,000 Heller Financial
6.500% due 05/15/00 502,030
360,000 Commercial Credit
5.750% due 07/15/00 360,288
625,000 Chrysler Financial
5.875% due 02/07/01 621,875
See Notes to Financial Statements
</TABLE>
<PAGE> 8
Portfolio of Investments
The Elite Income Fund
September 30, 1999 - Continued
<TABLE>
<CAPTION>
Market Value
Par Value Note 2A
------------
<S> <C> <C> <C>
760,000 GMAC
6.875% due 07/15/01 $ 763,800
700,000 Ford Motor Credit
8.200% due 02/15/02 723,625
500,000 Heller Financial
6.440% due 10/06/02 495,000
145,000 GMAC
7.050% due 09/29/03 145,362
105,000 GMAC
8.250% due 02/24/04 110,381
500,000 Ford Motor Credit
6.25% due 12/08/05 481,250
500,000 Federal Home Loan
0.000% due 09/29/17 120,205
------------
Total Financial/Corporate Bonds 4,476,419
------------
Total Value Bonds (Cost $24,888,592) 24,852,731
------------
Shares
Preferred Stock 1.8%
28,400 Glenborough Reality Preferred A.
(Cost $516,254) 466,825
------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Total Investments
(Cost $25,404,846**) 97.7% 25,319,556
Cash and receivables
In excess of liabilities 2.3% 582,829
----------- -------------
NET ASSETS 100.0% $25,902,385
=========== =============
<FN>
**Cost for Federal Income Tax purposes is the same.
At September 30, 1999, unrealized appreciation (depreciation) of
securities for Federal Income
Tax is as follows:
Unrealized appreciation $ 266,092
Unrealized depreciation (351,382)
------------
Net unrealized depreciation $
(85,290)
============
</FN>
</TABLE>
See Notes to Financial Statements
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999
<TABLE>
<CAPTION>
THE ELITE GROWTH & THE ELITE
INCOME FUND INCOME FUND
--------------------- ---------------
<S> <C> <C>
ASSETS:
Investments in securities at value (Notes 2A, 3 )
(Cost $43,497,050 and $25,404,846) $ 64,624,502 $ 25,319,556
Cash and cash equivalent (Note 2E) 4,286,340 183,246
Receivables:
Interest 13,276 446,782
Dividends 113,088 13,756
----------------- -----------------
Total Assets 69,037,206 25,963,340
----------------- -----------------
LIABILITIES:
Payables:
Investment management fees 59,334 15,774
Capital stock reacquired --- 2,221
Distributions 4,787 29,437
Accrued expenses 25,597 13,523
---------------- ---------------
Total Liabilities 89,718 60,955
---------------- ---------------
NET ASSETS:
The Elite Growth & Income Fund applicable
to 3,070,671 shares outstanding $ 68,947,488
===============
The Elite Income Fund-applicable to
2,601,554 shares outstanding $ 25,902,385
===============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
(Net assets / shares outstanding) $ 22.45 $ 9.96
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
At September 30, 1999 the components of net assets were as follows:
<S> <C> <C>
Paid-in capital $ 48,451,896 $ 26,036,963
Accumulated net realized gain (loss) (655,807) (51,572)
Undistributed net investment income 23,947 2,284
Net unrealized appreciation (depreciation) 21,127,452 (85,290)
================= ================
Net Assets $ 68,947,488 $ 25,902,385
================= ================
</TABLE>
See Notes to Financial Statements
<PAGE> 10
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1999
THE ELITE GROWTH & THE ELITE
INCOME FUND INCOME FUND
------------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest $ 420,579 $ 1,778,215
Dividends 1,024,419 50,441
----------------- -----------------
Total Income 1,444,998 1,828,656
----------------- -----------------
Expenses:
Investment management fee 773,094 197,932
Transfer agent fees 29,837 18,504
Custodian fees 27,769 13,392
Professional fees 23,272 9,973
Trustees fees and expenses 17,700 6,300
Record keeping service 53,411 13,996
Shareholder report 4,681 927
Registration fees and other 35,736 7,058
----------------- -----------------
Total Expenses 965,500 268,082
Fees paid indirectly (Note 6) (98,271) ---
Fees paid by manager (Note 5) --- (24,258)
----------------- -----------------
Net Expenses 867,229 243,824
----------------- -----------------
Net Investment Income 577,769 1,584,832
----------------- -----------------
</TABLE>
<TABLE>
<CAPTION>
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
SECURITIES AND OPTIONS CONTRACT
<S> <C> <C>
Net realized gain (loss):
Investment securities 1,909,645 (43,939)
Expired and closed covered call
options written (Note 4) (1,415,229) ---
----------------- ---------------
Net realized gain (loss) on investment
securities and option contracts 494,416 (43,939)
----------------- ---------------
Net increase(decrease) in unrealized
appreciation of investment securities 5,077,340 (2,028,967)
================= ===============
Net increase (decrease) in net assets
resulting from operations $ 6,149,525 $ (488,074)
================= ===============
</TABLE>
See Notes to Financial Statements
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
THE ELITE
GROWTH & INCOME FUND
For the Years Ended September 30
<TABLE>
<CAPTION>
1999 1998
----------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 577,769 $ 605,847
Net realized gain (loss) on investment
securities and options contracts 494,416 (1,150,223)
Net increase (decrease) in unrealized
appreciation of investment securities 5,077,340 (3,913,327)
----------------- ----------------
Net increase (decrease) in net assets
resulting from operations 6,149,525 (4,457,703)
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income (590,584) (569,085)
Distributions from net realized gain on
investment transactions --- ---
CAPITAL SHARE TRANSACTIONS:
Increase(decrease) in net assets
resulting from capital share
transactions (a) (8,882,160) 9,578,726
----------------- ----------------
Total increase(decrease) in net assets (3,323,219) 4,551,938
NET ASSETS:
Beginning of year 72,270,707 67,718,769
================= =================
End of year (including undistributed
net investment income of $23,947
and $36,762 respectively). $ 68,947,488 $ 72,270,707
================= =================
</TABLE>
<TABLE>
<CAPTION>
(a)Transactions in capital stock were as
follows:
Year Ended Year Ended
September 30,1999 September 30,1998
-------------------- -------------------
Shares Value Shares Value
----------- -------------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold 290,893 $ 6,787,327 868,755 $ 20,261,676
Shares issued in
reinvestment of
distributions 22,464 534,857 23,665 537,450
----------- -------------- ---------- -------------
313,357 7,322,184 892,420 20,799,126
Shares redeemed (681,079) (16,204,344) (497,374) (11,220,400)
----------- -------------- ---------- =============
Net increase(decrease) (367,722) $ (8,882,160) 395,046 $ 9,578,726
=========== ============== ========== =============
</TABLE>
See Notes to Financial Statements
<PAGE> 12
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
THE ELITE
INCOME FUND
For the Years Ended September 30
1999 1998
----------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,584,832 $ 1,190,508
Net realized gain (loss) on investment
securities (43,939) 49,483
Net increase (decrease) in unrealized
appreciation of investment securities (2,028,967) 1,712,996
----------------- ---------------
Net increase (decrease) in net assets
resulting from operations (488,074) 2,952,987
NET EQUALIZATION CREDITS (NOTE 2D) --- 108,697
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income (1,582,548) (1,285,477)
CAPITAL SHARE TRANSACTIONS:
Increase (decrease)in net assets
resulting from capital share
transactions(a) (2,867,844) 12,752,701
----------------- ---------------
Total increase(decrease) in net assets (4,938,466) 14,528,908
NET ASSETS:
Beginning of year 30,840,851 16,311,943
================= ===============
End of year (including undistributed net
investment income of $2,284 and
$24,544 respectively). $ 25,902,385 $ 30,840,851
================= ===============
</TABLE>
<TABLE>
<CAPTION>
(a)Transactions in capital stock were as
follows:
Year Ended Year Ended
September 30,1999 September 30,1998
----------------------- -------------------
Shares Value Shares Value
----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 566,425 $ 5,832,919 1,603,301 $16,408,068
Shares issued in
reinvestment
of distributions 141,532 1,445,177 109,272 1,135,100
----------- ------------- ---------- ------------
707,957 7,278,096 1,712,573 17,543,168
Shares redeemed (982,376) (10,145,940) (468,391) (4,790,467)
----------- ------------- ---------- ------------
Net increase(decrease) (274,419) $(2,867,844) 1,244,182 $12,752,701
=========== ============= ========== ============
</TABLE>
See Notes to Financial Statements
<PAGE> 13
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
THE ELITE
GROWTH & INCOME FUND
For a share outstanding throughout each year
Years Ended September 30,
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
Net asset value,
beginning of year $ 21.02 $ 22.25 $ 20.55 $ 16.64 $15.29
-------- -------- -------- -------- --------
ICOME FROM INVESTMENT
OPERATIONS
Net investment income .18 .18 .29 .11 .18
Net gain(loss) on
securities(both realized
and unrealized) 1.43 (1.24) 6.15 3.92 2.52
-------- -------- -------- -------- --------
Total from investment
operations 1.61 (1.06) 6.44 4.03 2.70
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net
investment income (.18) (.17) (.29) (.12) (.18)
Distributions from capital
gains --- --- (4.45) --- (1.17)
-------- -------- -------- -------- --------
Total distributions (.18) (.17) (4.74) (.12) (1.35)
-------- -------- -------- -------- --------
Net asset value, end of year $ 22.45 $ 21.02 $ 22.25 $ 20.55 $ 16.64
======== ======== ======== ======== ========
Total Return 7.62% (4.82%) 34.66% 24.26% 19.92%
RATIOS/SUPPLEMENTAL DATA
Net asset value, end
of year (in 000's) $ 68,947 $ 72,271 $ 67,719 $ 44,799 $ 31,182
Ratio of expenses to
average net assets 1.25%* 1.23%* 1.30%* 1.33% 1.42%*
Ratio of net investment
income To average .75% .71% 1.41% .61% 1.18%
net assets
Portfolio turnover 133.11% 138.49% 115.80% 156.93% 137.56%
</TABLE>
*Ratio reflects fees paid through a directed brokerage arrangement. No fees
were paid through a brokerage arrangement for 1996. The expense ratios for 1999,
1998, 1997 and 1995 after reduction of fees paid through the directed brokerage
arrangement were 1.12%, 1.15%, 1.27% and 1.35%, respectively.
<PAGE> 14
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
THE ELITE
INCOME FUND
For a share outstanding throughout each year
Years Ended September 30,
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
Net asset value, $ 10.72 $ 10.00 $ 9.73 $10.03 $ 9.48
beginning of year
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income .59 .59 .60 .60 .62
Net gain(loss) on
securities(both realized
and unrealized) (.76) .72 .27 (.23) .54
-------- -------- -------- -------- --------
Total from investment
operations (.17) 1.31 .87 .37 1.16
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net
investment income (.59) (.59) (.60) (.62) (.61)
Distributions from
capital gains --- --- --- (.05) ---
-------- -------- -------- -------- --------
Total distributions (.59) (.59) (.60) (.67) (.61)
-------- -------- -------- -------- --------
Net asset value, end
of year $ 9.96 $ 10.72 $ 10.00 $ 9.73 $ 10.03
======== ======== ======== ======== ========
Total Return (1.62)% 13.44% 9.20% 3.79% 12.56%
RATIOS/SUPPLEMENTAL DATA
Net asset value, end of
year (in 000's) $ 25,902 $ 30,841 $ 16,312 $12,618 $12,366
Ratio of expenses to
average net assets .95%* .92% .96% 1.00% 1.12%
Ratio of net investment
income to average
net assets 5.60% 5.63% 6.01% 6.01% 6.34%
Portfolio turnover 33.01% 21.41% 37.60% 43.37% 42.24%
</TABLE>
* Ratio reflects expenses prior to reimbursement from manager. Expense
ratio after reimbursement was .86%.
See Notes to Financial Statements
<PAGE> 15
October 20, 1999
NOTES TO FINANCIAL STATEMENTS
September 30,1999
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 followed the practice
known as "equalization" by which a portion of the proceeds from sales and costs
of repurchases of shares of the Fund was credited or charged to income on the
date of the transaction so that undistributed net income per share was
unaffected by shares of the Fund sold or repurchased. Effective October 1, 1998
this practice was discontinued. The discontinuation has no effect on net asset
value or distributions paid to shareholders since such distributions are
determined in accordance with income tax regulations.
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.
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
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, 1999 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 Percentage of
Acquisition Cost Value Net Assets
<S> <C> <C> <C> <C>
Stocks
105,139 Optiva Corporation 04/25/94 $ 111,710 $1,182,814 1.71%
135,000 Coffee Station, Inc 04/16/96 303,750 135,000 .20%
--------- ---------- ---------
Total $ 415,460 $1,317,814 1.91%
========= ========== =========
</TABLE>
Note 4 - Purchases and Sales of Securities
For the year ended September 30, 1999, purchases and sales of securities,
other than options and short-term notes were as follows:
<TABLE>
<CAPTION>
Purchases Sales
<S> <C> <C>
The Elite Growth and Income Fund $91,539,468 $ 98,581,316
The Elite Income Fund $ 9,086,189 $ 11,167,412
</TABLE>
<TABLE>
<CAPTION>
For The Elite Growth & Income Fund, transactions in covered call options
written were as follows:
Number of Contracts* Premiums
<S> <C> <C>
Options outstanding at beginning of year 1,310 $2,114,503
Options written 6,290 2,887,170
Options terminated in closing
purchase transactions (3,990) (3,379,559)
Options exercised --- ---
Options expired (1,050) (222,087)
======= ===========
Options outstanding at September 30,1999 2,560 $1,400,027
======= ===========
</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.
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
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 ended September 30,
1999 were $98,271 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 technology and
telecommunications industries. The Elite Income Fund has investments in excess
of 10% in the electric and gas utilities and financial industries.
