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THE WEXFORD TRUST
(Comprised of the Muhlenkamp Fund)
Report on Audit of Financial Statements
For the year ended December 31, 1996
C O N T E N T S
PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Statement of Assets and Liabilities, December 31, 1996 2
Portfolio of Investments, December 31, 1996 3-5
Statement of Operations for the year ended December 31, 1996
6
Statements of Changes in Net Assets for the years ended
December 31, 1996 and 1995 7
Selected Per Share Data and Ratios for each of the years
ended December 31, 1989 through 1996 8
Notes to Financial Statements, December 31, 1996 9-13
REPORT ON INTERNAL ACCOUNTING CONTROL 14
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Trustees of the
Wexford Trust (Comprised of the Muhlenkamp Fund)
We have audited the accompanying statement of assets and
liabilities of the Wexford Trust (comprised of the Muhlenkamp
Fund), including the portfolio of investments as of December 31,
1996, and the related statement 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 selected per share
data and ratios for each of the seven years in the period then
ended. These financial statements and selected per share data
and ratios are the responsibility of the Trustees. Our
responsibility is to express an opinion on these financial
statements and selected per share data and ratios based on our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and selected per share data and ratios
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 December 31, 1996 by
correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share
data and ratios referred to above present fairly, in all material
respects, the financial position of the Wexford Trust as of
December 31, 1996, the results of its operations for the year
then ended, the changes in net assets for each of the two years
in the period then ended, and the selected per share data and
ratios for each of the seven years in the period then ended, in
conformity with generally accepted accounting principles.
/S/ Schneider Downs & Co. Inc.
Pittsburgh, Pennsylvania
January 23, 1997
THE WEXFORD TRUST
(COMPRISED OF THE MUHLENKAMP FUND)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
ASSETS
INVESTMENTS, AT MARKET VALUE (Identified cost
$27,622,257) $41,657,42
5
RECEIVABLES
Subscriptions receivable 340,733
Dividends 49,578
Interest 15,274
405,585
PREPAID INSURANCE 1,225
Total Assets
42,064,235
LIABILITIES
ACCOUNTS PAYABLE
Accounts Payable 19,149
Dividends Payable 1,194
Redemptions Payable 1,600
21,943
OTHER CURRENT LIABILITIES
Accrued Expenses 3,336
Total Liabilities 25,279
Total Net Assets
$42,038,95
6
NET ASSETS
CAPITAL PAID IN ON SHARES OF BENEFICIAL INTEREST
(shares authorized - unlimited) (Note 4)
$28,155,07
9
ACCUMULATED UNDISTRIBUTED INVESTMENT INCOME $10,281
ACCUMULATED UNDISTRIBUTED NET CAPITAL LOSS (161,572)
NET UNREALIZED APPRECIATION OF INVESTMENTS AS
OF END OF YEAR (Note 6)
14,035,168
Total Net Assets
$42,038,95
6
NUMBER OF SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,527,718
(Note 4)
NET ASSET VALUE PER SHARE (Net assets divided by
shares
outstanding at year-end) $27.52
See notes to financial statements.
2
THE WEXFORD TRUST
(COMPRISED OF THE MUHLENKAMP FUND)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
Principal
Amount or Market
Shares Value
COMMON STOCK - 81.2%
Aerospace - 4.1%
* BE Aerospace, Inc. 17,000 $461,125
Lockheed Martin 14,000 1,281,000
1,742,125
Airlines - 1.6%
Air Express International Corp. 21,562 695,375
Autos - 3.8%
Ford Motor Company 32,000 1,020,000
* National RV Holdings 20,000 292,500
Superior Industries 13,180 304,788
1,617,288
Building - 3.2%
Armstrong World Industries 13,000 903,500
* Griffon Corp. 28,400 347,900
* Strober Organization 16,000 96,000
1,347,400
Banks - 8.4%
Chase Manhattan Corp. 12,000 1,071,000
Citicorp 10,000 1,030,000
Mellon Bank Corp. 20,000 1,420,000
3,521,000
Brokerage - 6.9%
A.G. Edwards 12,500 420,312
Merrill Lynch 16,000 1,304,000
Morgan Stanley, Inc. 10,000 571,250
Soutwest Sec Inc. 40,000 600,000
2,895,562
Capital Goods - 9.6%
General Electric 9,000 889,875
Graco, Inc. 40,550 993,475
Idex Corp. 7,500 299,063
Kysor Industrial 30,000 978,750
Trinova Corp. 24,000 873,000
4,034,163
Sub-Total
$15,852,91
3
* Non-Income Producing
See notes to financial statements.
3
THE WEXFORD TRUST
(COMPRISED OF THE MUHLENKAMP FUND)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
(Continued)
Principal
Amount or Market
Shares Value
BALANCE BROUGHT FORWARD
$15,852,91
3
Conglomerate - 0.8%
Scotsman Ind., Inc. 15,000 354,375
Electronics - 4.4%
Intel Corp. 14,000 1,833,125
Finance - 6.8%
Fidelity National Financial 13,210 199,800
Green Tree Financial Corp. 38,800 1,498,650
National City Corp. 16,852 756,234
* Pioneer Financial Services Inc. 16,000 400,000
2,854,684
Furniture - 2.6%
* Roberds, Inc. 5,000 41,250
* Stanley Furniture, Inc. 28,400 564,450
* Winsloew Furniture 49,600 483,600
1,089,300
Insurance - 20.0%
American Bankers Insurance Group 8,000 409,000
Bankers Life Holding 20,000 500,000
Conseco, Inc. 30,000 1,912,500
Frontier Insurance 29,426 1,125,544
Integon Corp. 30,000 532,500
Reliance Group Holdings Inc. 65,000 593,125
Sun America 45,000 1,996,875
Vesta 42,500 1,333,438
8,402,982
Sub-Total
$30,387,37
9
* Non-Income Producing
See notes to financial statements.
4
THE WEXFORD TRUST
(COMPRISED OF THE MUHLENKAMP FUND)
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
(Continued)
Principal
Amount or Market
Shares Value
BALANCE BROUGHT FORWARD
$30,387,37
9
Metals - 1.4%
J&L Specialty Steel 30,000 341,250
Matthews Int'l Corp. 8,000 226,000
567,250
Rails - 0.6%
Burlington Northern Industries, Inc. 3,000 259,125
Savings and Loan - 2.2%
Federal National Mortgage Assoc. 24,400 908,900
Technology - 0.3%
* Scios Inc. 20,000 122,813
Tobacco - 4.5%
Philip Morris 16,860 1,898,857
Total Common Stocks (Cost
$20,507,126) 34,144,324
BONDS AND NOTES - 4.7%
General Motors Acceptance Corporation - 0%, 2,300,000 646,875
deferred debentures, due 2015
U.S. Treasury, stripped interest - 0%, due 800,000 270,127
2013
U.S. Treasury, stripped interest - 0%, due 6,900,000 1,061,813
2024
Total Bonds and Notes (Cost 1,978,815
$1,580,845)
CASH AND CASH EQUIVALENTS - 13.2%
Star Treasury 5,534,286 5,534,286
Total (Cost $27,622,257)
$41,657,42
5
* Non-Income Producing
See notes to financial statements.
5
THE WEXFORD TRUST
(COMPRISED OF THE MUHLENKAMP FUND)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
INVESTMENT INCOME
Interest $115,500
Dividends 535,083
Total Investment Income 650,583
EXPENSES
Investment advisor (Note 3) $311,450
Transfer agent fees 37,816
Printing 27,543
Registrations and filing 26,524
Postage 19,018
Custodian 18,613
Audit 17,194
Fund accounting 16,278
Legal 2,605
Insurance 1,776
Total Expenses 478,817
Fees Paid Indirectly (Note 7) (5,000) 473,817
Net Investment Income 176,766
REALIZED AND UNREALIZED (LOSS) GAIN ON
INVESTMENTS
Net realized loss on investments (Note 6) (161,572)
Change in unrealized appreciation in value of 8,332,484
investments for the year (Note 6)
Net Gain on Investments 8,170,912
Net Increase in Net Assets Resulting
From Operations $8,347,678
See notes to financial statements.
6
THE WEXFORD TRUST
(COMPRISED OF THE MUHLENKAMP FUND)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $176,766 $222,994
Net realized (loss) gain on investments (Note (161,572) 133,077
6)
Unrealized appreciation in value of 8,332,484 5,376,466
investments (Note 6)
Net Increase in Net Assets Resulting 8,347,678 5,732,537
From Operations
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (166,485) (231,706)
Net realized gain from investments (2,653) (129,026)
(169,138) (360,732)
CAPITAL SHARE TRANSACTIONS
Net proceeds from sale of 509,156 shares in
1996 and
201,856 in 1995 (Note 4) 3,679,849
12,340,767
Net asset value of 6,243 shares in 1996 and
16,426
shares in 1995 issued to shareholders on
reinvestment
of dividends (Note 5) 171,811 349,551
Cost of 96,455 shares in 1996 and 132,886
shares
in 1995, redeemed (Note 4)
(2,223,493) (2,440,624)
Net Increase in Net Assets Resulting
From
Capital Share Transactions 1,588,776
10,289,085
Total Increase in Net Assets 6,960,581
18,467,625
NET ASSETS
Beginning of year
23,571,331 16,610,750
End of year (including undistributed
investment income of
$10,281 and undistributed net realized loss
of $161,572
in 1996 and undistributed net realized gain
of $4,051 and
undistributed investment loss of $1,399 in
1995) $42,038,95 $23,571,33
6 1
See notes to financial statements.
7
THE WEXFORD TRUST
(COMPRISED OF THE MUHLENKAMP FUND)
SELECTED PER SHARE DATA AND RATIOS
FOR THE YEARS ENDED DECEMBER 31,
1991 THROUGH 1996
1996 1995 1994 1993 1992
NET ASSET VALUE, BEGINNING OF YEAR $21.26 $16.23$17.86 $15.20$13.25
Income from Investment Operations:
Net investment income (1) 0.14 0.21 0.11 0.12 0.20
Net gains or (losses) on 6.23 5.14 (1.39) 2.63 1.89
securities
Total From Investment 6.37 5.35 (1.28) 2.75 2.09
Operations
Less Distributions:
Dividends (from investment (0.11) (0.21)(0.10) (0.08)(0.14)
income)
Distributions (from capital - (0.11)(0.25) - -
gains)
Return of capital - - - (0.01) -
Total Distributions (0.11) (0.32)(0.35) (0.09)(0.14)
NET ASSET VALUE, END OF YEAR $27.52 $21.26$16.23 $17.86$15.20
Total Return 29.90% 32.9%(7.20)% 18.1%15.80%
Net Assets, End of Period
$42,038,956
23,571,331
$16,610,750
$12,057,605
$4,716,214
Ratio of Total Expenses to Average 1.56% 1.4% 1.57% 1.30%1.41%
Net Assets
Ratio of Net Investment Income to 0.58% 1.10% 0.70% 0.70%1.44%
Average Net Assets
Portfolio Turnover Rate 16.90% 22.7 25.60% 14.1 20.10
0% 0% %
Average Commission Rate Paid (dollar 0.0382 .044 .0471 .058 .0704
per share) 2 6
(1) Computed on weighted average
number of shares outstanding during
the year.
(2) During the years ended December
31, 1992 through 1996, the Fund
utilized commission credits of
$4,420, $5,950, $8,830
$11,000 and $5,000,
respectively, to pay certain
expenses of the Fund. The total
return for the Fund would have been
15.6%,
18.0%, (7.2)%, 32.9% and
29.9% for the years ended December
31, 1992 through 1996, respectively,
without the credits.
See notes to financial statements.
8
NOTE 1 - ORGANIZATION
The Wexford Trust (the Trust) was organized as a Massachusetts
Business Trust on September 21, 1987 and operations commenced on
November 1, 1988. The Trust is registered under the Investment
Company Act of 1940, as amended. The Muhlenkamp Fund (the Fund) is a
series of the Wexford Trust and is currently the only fund in the
Trust.
The Fund operates as a diversified open-end mutual fund that
continuously offers its shares for sale to the public. The Fund will
manage its assets to seek a maximum total return to its shareholders,
primarily through a combination of interest and dividends and capital
appreciation by holding a diversified list of publicly traded stocks.
The Fund may acquire and hold fixed-income or debt investments as
market conditions warrant and when, in the opinion of its advisor, it
is deemed desirable or necessary in order to attempt to achieve its
investment objective.
The primary focus of the Fund is long-term and the investment
options diverse. This allows for greater flexibility in the daily
management of fund assets. However, with flexibility also comes the
risk that assets will be invested in various classes of securities at
the wrong time and price.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results
could differ from those estimates.
The Fund is exposed to market risk on the amount invested in
marketable securities. The maximum amount of loss the Fund would
incur is limited to the amount recorded in the 1996 financial
statements. The Fund does not hold any type of collateral on the
marketable securities. This exposure to market risk is customary for
all entities which have invested in financial instruments.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies applied by
management in the preparation of the accompanying financial statements
follows.
Investment valuations - Each stock and bond is valued at the
latest sales price thereof on the last business day of the fiscal
period as reported by the securities exchange on which the issued is
traded. If no sale is reported, the security is valued at the last
quoted bid price.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investment transactions and related investment income -
Investment transactions are accounted for on the trade date (date the
order to buy or sell is executed). Dividend income is recorded on the
ex-dividend date. Interest income is recorded daily on the yield to
maturity basis. Discounts and premiums on securities are amortized
over the life of the respective securities. The Fund uses the
specific identification method in computing gain or loss on the sale
of investment securities.
Federal income taxes - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code that are applicable to
regulated investment companies and to distribute substantially all of
its taxable income to its shareholders. Therefore, no federal income
tax provision is required.
Dividends and distributions to shareholders of beneficial
interest - Dividends and distributions are recorded by the Trust on
the record date.
NOTE 3 - INVESTMENT MANAGEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Muhlenkamp & Co., Inc., an affiliate of which an officer-
stockholder is a trustee of the Trust, receives a fee for investment
management. The fee is computed and accrued daily based on the net
asset value at the close of business and is equal to 1% per annum.
The fee totaled $311,450 for the year ended December 31, 1996. The
investment advisory agreement provides for the reimbursement of
expenses excluding auditor fees, fidelity bonding, and brokerage
commissions until the net assets of the Muhlenkamp Fund (the Fund)
equal or exceed $1,000,000. Since the Fund's net assets exceed this
amount, the advisor is permitted to charge the fund for some or all of
its routine administration costs which totaled approximately $93,744
for the year ended December 31, 1996. An expense reimbursement of
$93,744 was requested for the year ended December 31, 1996. The
reimbursement consists of the following:
Certain affiliated persons held in the aggregate 30,971 shares
with a net asset value of $852,315 in the Muhlenkamp Fund at December
31, 1996. In addition, the Muhlenkamp & Co., Inc. Pension & Trust
Fund held 14,279 shares with a net asset value of $392,976 at December
31, 1996.
NOTE 4 - CAPITAL SHARE TRANSACTIONS
The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest
with a par value of $.001 per share. Transactions in capital stock
were as follows:
NOTE 5 - DIVIDENDS AND DISTRIBUTIONS
On December 30, 1996, the Trustees declared, recorded, and paid a
dividend of $.11 per outstanding share.
NOTE 6 - INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-
term securities, were $9,148,420 and $5,124,591, respectively in 1996.
Purchases and sales of U.S. Government obligations were $1,019,682 and
- -0-, respectively in 1996.
The components of the net realized loss on investments of
$161,572 recognized during the year ended December 31, 1996 are as
follows:
The components of the net unrealized appreciation in value of the
investments held at December 31, 1996 are as follows:
The unrealized appreciation of securities during the year ended
December 31, 1996 is $8,332,484.
NOTE 7 - DIRECTED BUSINESS ARRANGEMENT
The Fund has a directed business arrangement with Capital
Institution Services, Inc. (CIS). Upon the purchase and/or sale of
investment securities, the Fund pays a brokerage commission to CIS.
These commission payments generate nonrefundable cumulative credits
which are available to pay certain expenses of the Fund, such as
performance measurement, pricing information, custodian and record
keeping services, legal, accounting and other administrative costs.
The commission credits redeemed during the year were utilized by the
Fund to pay accounting fees due the Independent Accounting Firm and
administrative expenses.
NOTE 7 - DIRECTED BUSINESS ARRANGEMENT (Continued)
The following is an analysis of commissions credits generated,
utilized and available to pay future expenses of the Fund:
The following is an analysis of fund expenses with and without
commission credits:
To the Shareholders and Trustees of the
Wexford Trust (Comprised of the Muhlenkamp Fund)
In planning and performing our audit of the financial
statements of The Wexford Trust (comprised of the Muhlenkamp
Fund) for the year ended December 31, 1996, we considered its
internal control structure, including procedures for
safeguarding securities, in order to determine our auditing
procedures for the purpose of expressing our opinion on the
financial statements and to comply with the requirements of
Form N-SAR, not to provide assurance on the internal control
structure.
The Trustees of the Fund are responsible for establishing and
maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are
required to assess the expected benefits and related costs of
internal control structure policies and procedures. Two of the
objectives of an internal control structure are to provide
management with reasonable, but not absolute, assurance that
assets are safeguarded against loss from unauthorized use or
disposition and that transactions are executed in accordance
with management's authorization and recorded properly to permit
preparation of financial statements in conformity with
generally accepted accounting principles.
Because of inherent limitations in any internal control
structure, errors or irregularities may occur and not be
detected. Also, projection of any evaluation of the structure
to future periods is subject to the risk that it may become
inadequate because of changes in conditions or that the
effectiveness of the design and operation may deteriorate.
Our consideration of the internal control structure would not
necessarily disclose all matters in the internal control
structure that might be material weaknesses under standards
established by the American Institute of Certified Public
Accountants. A material weakness is a condition in which the
design or operation of the specific internal control structure
elements does not reduce to a relatively low level the risk
that errors or irregularities in amounts that would be material
in relation to the financial statements being audited may occur
and not be detected within a timely period by employees in the
normal course of performing their assigned functions. However,
we noted no matters involving the internal control structure,
including procedures for safeguarding securities, that we
consider to be material weaknesses as defined above as of
December 31, 1996.
This report is intended solely for the information and use of
management and the Securities and Exchange Commission.
/S/ Schneider Downs & Co., Inc.
Pittsburgh, Pennsylvania
January 23, 1997
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