Dear Shareholder:
The Trustees and Management of the Muhlenkamp Fund are
pleased to present this annual report of your fund.
As of December 31, 1998, the Net Asset Value (NAV) of your fund
was $37.65 after posting a $.075 dividend. The 1998 total return
for the fund was 3.22%.
Year Ending Total Return (%)
12/31 Muhlenkamp Fund S&P 500
1991 45.4 30.5
1992 15.8 7.7
1993 18.1 9.9
1994 (7.3) 1.3
1995 32.9 37.1
1996 30.0 22.9
1997 33.3 33.4
1998 3.2 28.12
Chart goes here. This is a line chart comparing the
performance of the Muhlenkamp Fund with the S&P 500 since
December 31, 1990. On December 31, 1990 the Fund and the
S&P are each assigned an index value of 100. At the end of
each subsequent year this value is recalculated using the
performance figures from the above table.
The results shown below are
then plotted on a line chart.
X-Axis = Date Y-Axis = Index Value
Muhlenkamp Fund S&P 500
12/31/90 100 100
12/31/91 145 131
12/31/92 168 141
12/31/93 198 154
12/31/94 184 157
12/31/95 244 215
12/31/96 317 264
12/31/97 423 352
12/31/98 436 451
1998 was a challenging year in the investment markets.
We got it partly right and partly wrong.
The markets started the year very strongly. In April 1998
Muhlenkamp Memorandum we wrote:
"At yearend, we judged U.S. stock prices to be fair
based on 1997 earnings. We now judge prices to be fair
based on 1998 estimated earnings. Since it's only April,
there is ample time for normal (5-10%) market corrections
this year. We don't expect a decline greater than 10%,
because the trends in GDP and inflation remain positive.
In summary, prices are fair; the long-term and intermediate-term
trends are positive; in the short-term we expect prices to be
volatile."
Generally speaking we got the economic part right. GDP growth
remained positive and inflation continued to decline. We said
that you didn't want to be a U.S. producer selling to Asia. We
also said the U.S. consumer buying from Asia was in good shape.
So, the broad-based economic numbers we got right.
We failed to foresee the dramatic decline in the prices of world
tradable goods including; oil, grains, metals, paper and chemicals.
The prices of these goods fell much faster and much farther than we
anticipated. The stock prices of companies serving these industries
also fell farther and faster than we anticipated. We were hurt by
that: specifically in the stocks of oil service companies and
manufacturers of farm equipment. We also failed to foresee the
default by Russia on their government debt, and the impact that
had on the investment markets. The Russian economy and Russian
debt are very small parts of the world economy and world
investment markets, but Russia's default was the first default
on debt by a government in many years. It had a dramatic effect
on the worldwide debt markets. This effect was greatly magnified by
the widespread ownership of emerging market government bonds
by hedge funds, which bought them with borrowed money.
In August and again in October we witnessed the selling of securities
regardless of price. We believe this selling was done by hedge funds
who received margin calls on their portfolios in August, forcing them
to sell. They then received redemption requests by their investors at
the end of September forcing them to sell again in October. This
forced selling drove market prices of both bonds and stocks down
dramatically in August and October. This selling engendered a climate
of fear and uncertainty in the marketplace. This fear and uncertainty
manifested itself in several ways. First, of course, it resulted in the
selling of securities, regardless of price. Second, it fostered a
preference for only the highest quality bonds (U.S. Treasuries) and
for the highest quality stocks. Third, it fostered fears of recession.
Headlines of the time speculated that we must be facing serious economic
problems for the markets to be so weak.
But economic data confirm that the economy remains quite healthy.
As the data continue to come in, we believe that confidence in the
economy and in secondary stocks will recover and that values in the
marketplace will once again reflect corporate values. In the fearful
time of August-October, value didn't matter. Those folks needing or
wanting to own securities were only interested in owning those perceived
as the highest quality, which we call "security blankets." In the bond
markets, only Treasury bonds were good enough. Treasury bond prices went
up, all other bond prices went down. In the stock market, only two sectors
did well: the biggest and the best.
Historically, lower P/E's have protected investors in declining markets,
especially if the decline was sizeable or protracted. In 1998, the decline
was sizable but short-lived. At any rate, our lower P/E's didn't help us
this time. Investors paid up for "security blankets," not value.
As the data continue to come in showing the U.S. economy is doing well,
inflation is under control and corporate profits are in decent shape, we
expect investors to broaden their list of acceptable stocks to include good
companies at favorable prices, such as those we own.
Ronald H. Muhlenkamp
President
February 1999
THE MUHLENKAMP FUND
(A PORTFOLIO OF THE WEXFORD TRUST)
Financial Statements for the
Year Ended December 31, 1998 and 1997, and
Independent Auditors Report
THE MUHLENKAMP FUND
(A PORTFOLIO OF THE WEXFORD TRUST)
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS REPORT 1
FINANCIAL STATEMENTS:
Statement of Assets and Liabilities as of December 31, 1998 2
Portfolio of Investments as of December 31, 1998 3-7
Statement of Operations for the Year Ended December 31, 1998 8
Financial Highlights for the Years Ended December 31, 1994 to 1998
9
Statements of Changes in Net Assets for the Years Ended December
31, 1998 and 1997 10
Notes to Financial Statements 11-14
INDEPENDENT AUDITORS REPORT
To the Trustees of the Wexford Trust and
Shareholders of the Muhlenkamp Fund:
We have audited the accompanying statement of assets and
liabilities, including the portfolio of investments, of The
Muhlenkamp Fund (the Fund) (a portfolio of the Wexford Trust), as
of December 31, 1998, and the related statement of operations for
the year then ended, the statements of changes in net assets and
the financial highlights for each of the two 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. The
financial highlights for the three years ended December 31, 1996
were audited by other auditors, whose report thereon dated January
23, 1997, expressed an unqualified opinion.
We conducted our audits 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 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 the securities
owned as of December 31, 1998, by correspondence with the custodian
and brokers; where replies were not received, we performed other
auditing procedures. 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 Muhlenkamp Fund as of December 31, 1998,
the results of its operations for the year then ended, the changes
in its net assets and the financial highlights for each of the two
years in the period then ended, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
January 11, 1999
PORTFOLIO OF INVESTMENTS
EXCEL 2924/PAGES 3-5
THE MUHLENKAMP FUND
(A Portfolio of the Wexford Trust)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
ASSETS
INVESTMENTS, AT VALUE
(Identified cost $162,353,568) $196,530,186
RECEIVABLES:
Dividends 187,026
Interest 6,255
Subscriptions 355,117
Total receivables 548,398
PREPAID EXPENSES 1,579
Total assets 197,080,163
LIABILITIES
COVERED CALL OPTIONS WRITTEN, AT VALUE (Premiums
received $551,082) 1,156,975
ADVISOR FEE 165,952
ACCRUED EXPENSES 54,022
DIVIDENDS PAYABLE 295
REDEMPTIONS PAYABLE 741,319
Total liabilities 2,118,563
NET ASSETS $194,961,600
NET ASSETS CONSIST OF:
CAPITAL PAID IN ON SHARES OF BENEFICIAL INTEREST
(Shares authorized-unlimited) $161,623,293
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME (538)
ACCUMULATED NET REALIZED (LOSS) ON INVESTMENTS (231,979)
NET UNREALIZED APPRECIATION OF INVESTMENTS 33,570,824
NET ASSETS $194,961,600
NUMBER OF SHARES OF BENEFICIAL INTEREST OUTSTANDING 5,178,767
NET ASSET VALUE PER SHARE $37.65
See notes to financial statements.
THE MUHLENKAMP FUND
(A Portfolio of the Wexford Trust)
<TABLE>
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
<C> <C>
Number of
Shares or
Principal
Name of Issuer and Title of Issue Amount Value
COMMON STOCK - 93.1%
Aerospace - 4.5%
* BE Aerospace, Inc. 357,000 $7,497,000
Lockheed Martin 14,000 1,186,500
8,683,500
Airlines - 6.7%
* Alaska Air Group 120,000 5,310,000
Air Express International Corp. 32,343 703,460
* AMR Corp. 120,000 7,125,000
3,138,460
Autos - 7.1%
Ford Motor Company 112,000 6,573,000
* National RV Holdings 204,500 5,265,875
Superior Industries 53,180 1,479,070
Dana Corp. 15,000 613,125
13,931,070
Banks - 7.1%
Chase Manhattan 24,000 1,633,500
Citigroup Inc. 120,000 5,940,000
Mellon Bank Corp. 90,000 6,187,500
13,761,000
Building Products - Cement/Aggregate 1.8%
Southdown Inc. 60,000 3,551,250
Brokerage - 6.9%
A.G. Edwards 18,750 698,438
Merrill Lynch 122,000 8,143,500
Southwest Securities, Inc. 229,635 4,621,404
13,463,342
(Continued)
Buildings - 1.6%
* Griffon Corp. 211,000 $2,241,875
* Monaco Coach Corp. 30,000 795,000
3,036,875
Capital Goods - 3.5%
Commercial Intertech 203,400 2,631,487
Graco, Inc. 105,825 3,121,838
Index Corp. 41,250 1,010,625
6,763,950
Diversified Operations - 1.5%
* Loews Corp. 30,000 2,947,500
Electronics - 5.0%
Computer Associates International, Inc. 105,000 4,475,625
Intel Corp. 44,000 5,216,750
9,692,375
Finance - 5.4%
Fidelity National Financial 113,882 3,473,398
* Friedman Billings Ramsey 5,000 32,500
Morgan Stanley Dean Witter Discover & Co. 81,500 5,786,500
National City Corp. 16,852 1,221,770
10,514,168
Finance Mortgage Loan Banker - 0.5%
* Long Beach Financial Corp. 136,000 1,020,000
Furniture - 4.3%
* Stanley Furniture, Inc. 305,500 5,575,375
* Winsloew Furniture 109,600 2,904,400
8,479,775
(Continued)
Homebuilding - 5.4%
American Woodmark Corp. 92,200 $3,157,850
Crossman Common Inc. 180,000 4,972,500
* NVR, Inc. 52,000 2,479,750
10,610,100
Industrial Equipment - 1.8%
AGCO Corp. 243,700 1,919,138
JLG Industries, Inc. 100,000 1,562,500
3,481,638
Insurance - 7.8%
Conseco, Inc. 344,608 10,532,082
Frontier Insurance 108,737 1,399,989
Reliance Group Holdings Inc. 232,500 2,993,438
Vesta Insurance Group Inc. 59,500 357,000
15,282,509
Machinery, Electric Utilities - 3.3%
* Kuhlman Corp. 69,200 2,620,950
Metal - 2.0%
Allegheny Teledyne Inc. 40,000 817,500
Matthews Intl. Corp. 16,000 504,000
* RTI International Metals 179,200 2,508,800
3,830,300
Oils, Natural Gas and Energy Related - 3.1%
* Calpine Corp. 200,000 5,050,000
* Global Marine, Inc. 20,000 183,750
* Omni Energy Services 198,000 841,500
6,075,250
Rails - 2.2%
Burlington Northern Santa Fe Corp 129,000 $4,353,750
Retail Jewelry - 0.1%
* Piercing Pagoda Inc. 10,000 97,500
Savings and Loan - 2.8%
* Federal National Mortgage Assoc. 74,400 5,505,600
Steel - Specialty - 0.4%
* Texas Industries Inc. 27,400 738,085
Technology - 4.2%
a) * Applied Materials 150,000 6,403,125
a) Helix Corp 30,000 390,000
* Scios Inc. 140,000 1,452,500
8,245,625
Tobacco - 3.7%
Philip Morris 135,280 7,237,480
Transportation - 2.3%
* Coach USA 129,800 4,502,439
Total Common Stocks (cost $150,888,883) 181,564,491
BONDS AND NOTES - 7.7%
General Motors Acceptance Corp.
-0-%, due 2015 $5,990,000 $1,949,745
U.S. Treasury Strip
-0-%, due 2013 800,000 375,047
U.S. Treasury Strip
-0-%, due 2024 26,900,000 6,679,109
U.S. Treasury Strip
-0-%, due 2023 21,000,000 5,662,251
Total Bonds and Notes (cost $6,856,318) 14,666,152
REGISTERED INVESTMENT COMPANY - 0.2%
Star Trust for U.S. Treasury (cost $299,543) 299,543 299,543
Total (identified and tax cost of $162,353,568) $196,530,186
* Non-income producing security
Investments are shown as a percentage of net assets at December 31, 1998.
a) At December 31, 1998, the Funds open covered call options contracts which are accounted for as a
liability on the Statement of Assets and Liabilities were as follows:
Number
of Contracts Market
Underlying security/expiration date/exercise price: Written Value
Applied Materials/January 2000/40 1,000 $1,050,000
Helix Technology/April 1999/10 300 106,875
Total covered call options written (premiums received $551,082) $1,156,875
See notes to financial statements.
</TABLE>
THE MUHLENKAMP FUND
(A Portfolio of the Wexford Trust)
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME:
Interest $1,129,844
Dividends 1,645,798
Total investment income 2,775,642
EXPENSES:
Investment advisor 1,804,540
Transfer agent fees 302,071
Printing 59,294
Postage 45,252
Registrations and filing 43,507
Custodian 41,660
Proxy 35,110
Fund accounting 30,856
Reorganization 30,381
Audit 30,101
Miscellaneous 12,147
Legal 6,095
Fidelity Bond 5,063
Total expenses 2,446,077
Fees paid indirectly (58,010)
Net expenses 2,388,067
NET INVESTMENT INCOME 387,575
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments (104,365)
Change in unrealized appreciation in value of investments (1,155,525)
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (1,259,890)
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $(872,315)
<TABLE>
See notes to financial statements.
THE MUHLENKAMP FUND
(A Portfolio of the Wexford Trust)
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31, 1998 TO 1994
<C> <C> <C> <C>
1998 1997 1996 1995 1994
NET ASSET VALUE, BEGINNING OF YEAR $36.55 $27.52 21.26 $16.23 $17.86
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (1) 0.08 0.18 0.14 0.21 0.11
Net gains or (losses) on securities (3) 1.10 8.98 6.23 5.14 (1.39)
Total from investment operations .18 9.16 6.37 5.35 (1.28)
LESS DISTRIBUTIONS:
Dividends from net investment income (0.08) (0.13) (0.11) (0.21) (0.10)
Distributions from net realized gain on investments - - - (0.11) (0.25)
Return of capital - - - - -
Total distributions (0.08) (0.13) (0.11) (0.32) (0.35)
NET ASSET VALUE, END OF YEAR $37.65 $36.55 $27.52 $21.26 $16.23
TOTAL RETURN (2) 3.22 % 33.28 % 29.96 % 32.90 % (7.20)%
NET ASSETS, END OF YEAR ($,000) $194,962 $125,461 $42,039 $23,571 $16,611
RATIO OF TOTAL EXPENSES TO AVERAGE NET ASSETS (2) 1.36 % 1.44 % 1.56 % 1.40 % 1.57 %
RATIO OF NET EXPENSES TO AVERAGE NET ASSETS (2) 1.32 % 1.33 % 1.54 % 1.35 % 1.52 %
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 0.21 % 0.53 % 0.58 % 1.10 % 0.70 %
PORTFOLIO TURNOVER RATE 27.03 % 13.89 % 16.90 % 22.70 % 25.60 %
(1) Computed on weighted average number of shares outstanding during the year.
(2) During the years ended December 31, 1994 through 1998, the Fund utilized the
commission credits of $8,830, $11,000, $5,000, $47,425 and $58,010, respectively,
to pay certain expenses of the Fund. The total return for the Fund would have been
(7.2%), 32.9%, 29.9%, 33.2% and 3.2% for the years ended December 31, 1994 through 1998,
respectively, without the credits.
(3) The amount shown in this caption for a share outstanding does not correspond
with the aggregate net realized and unrealized gains or (losses) on security transactions
for the year ended December 31, 1998, due to timing of sales and repurchases of
fund shares in relation to fluctuating market values of the investments of the Fund.
See notes to financial statements.
</TABLE>
<TABLE>
THE MUHLENKAMP FUND
(A Portfolio of the Wexford Trust)
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<C> <C>
1998 1997
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $387,575 $428,990
Net realized gain (loss) on investments (104,365) 33,958
Change in unrealized appreciation in value of investments (1,155,525) 20,691,181
Net increase in net assets resulting from operations (872,315) 21,154,129
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (392,344) (435,040)
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 120,046,067 76,279,489
Net asset value of shares issued to shareholders on
reinvestment of dividends 381,937 419,401
Cost of shares redeemed (49,662,383) (13,996,297)
Net increase in net assets resulting from capital share
transactions 70,765,621 62,702,593
Total increase in net assets 69,500,962 83,421,682
NET ASSETS:
Beginning of year 125,460,638 42,038,956
End of year (including (distributions in excess of) undistributed
net investment income of ($538) and $4,231 in 1998 and
1997, respectively) $194,961,600 $125,460,638
See notes to financial statements.
</TABLE>
THE MUHLENKAMP FUND
(A PORTFOLIO OF THE WEXFORD TRUST)
NOTES TO FINANCIAL STATEMENTS
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 portfolio of the 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies applied by
management in the preparation of the accompanying financial
statements follows.
a. Investment Valuations - Stocks and Bonds are valued at the
latest sales price on the last business day of the fiscal
period as reported by the securities exchange on which the
issue is traded. If no sale is reported, the security is
valued at the last quoted bid price.
b. Investment Transactions and Related Investment Income -
Investment transactions are accounted for on the trade date.
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.
c. Federal Taxes - It is the Funds 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 tax provision is
required.
d. Dividends and Distributions to Shareholders of Beneficial
Interest - Dividends and distributions are recorded by the
Fund on the record date.
e. 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 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.
f. Options Transactions - The Fund may write put and call options
only if such options are considered to be covered. A written call
option is considered to be covered when the writer of the call
option owns throughout the option period the security on which the
option is written. A written put option is considered covered when
the writer of the put has deposited and maintained amount equal to
or greater than the exercise price of the put option. The Fund may
purchase put and call options call.
When the Fund writes a covered call or put option, an amount
equal to the premium received is included in the statement
of assets and liabilities as a liability. The amount of the
liability is subsequently marked-to-market to reflect the
current market value of the option. If an option expires on
its stipulated expiration date or if the Fund enters into a
closing purchase transaction, a gain or loss is realized.
If a written call option is exercised, a gain or loss is
realized for the sale of the underlying security and the
proceeds from the sales are increased by the premium
originally received. If a written put option is exercised,
the cost of the security acquired is decreased by the
premium originally received. As writer of an option, the
Fund has no control over whether the underlying securities
are subsequently 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.
When the Fund purchases a call or put option, an amount
equal to the premium paid is included in the Funds
statement of assets and liabilities as a investment, and is
subsequently marked-to-market to reflect the current market
value of the option. If an option expires on the stipulated
expiration date or if the Fund enters into a closing sale
transaction, a gain or loss is realized. If the Fund
exercises a call the cost of the security acquired is
increased by the premium paid for the call. If a Fund
exercises a put option, a gain or loss is realized from the
sale of the underlying security, and the proceeds from such
a sale are decreased by the premium originally paid.
Written and purchased options are nonincome producing
securities.
3. INVESTMENT MANAGEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Muhlenkamp & Co., Inc., an affiliate of which an officer-
stockbroker 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 advisor is permitted to charge the
Fund for some or all of its routine administration costs which
totaled $211,565 for the year ended December 31, 1998. The
reimbursement consists of the following:
Registration and filings $63,267
Postage and printing 73,444
Legal and accounting 65,114
Insurance - Bond 4,348
Other 5,392
Total $211,565
Certain affiliated persons held in the aggregate 45,171 shares
with a net asset value of $1,700,688 in the Fund at December 31,
1998. In addition, the Muhlenkamp & Co., Inc. Pension & Trust
Fund held 31,174 shares with a net asset value of $1,173,710 at
December 31, 1998.
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 for the years ended December 31, 1998 and 1997
were as follows:
<TABLE> <C> <C> <C>
1998 1997
Shares Amount Shares Amount
Shares outstanding,
beginning of year 3,432,778 $90,857,672 1,527,718 $28,155,079
Shares sold 3,066,602 120,046,072 2,311,675 76,279,489
Shares issued to shareholders
in reinvestment of dividend 10,376 381,937 11,928 419,401
Shares redeemed (1,330,989) (49,662,383) (418,543) (13,996,297)
Shares outstanding,
end of year 5,178,767 $161,623,298 3,432,778 $90,857,672
</TABLE>
5. CAPITAL LOSS CARRYFORWARD
As of December 31, 1998, the Fund had available for federal
income tax purposes a capital loss carryforward of $231,979
which expires as follows:
December 31, 2004 $127,614
December 31, 2006 104,365
6. COVERED CALL OPTIONS
As of December 31, 1998, portfolio securities valued at
$4,658,750 were segregated by the custodian in connection with
covered call options written by the Fund.
The Funds activity in written options for the year ended
December 31, 1998 was as follows:
Number
of Premiums
Contracts Received
Options outstanding at beginning of year - $-
Options sold 1,800 693,327
Options expired prior to exercise (500) (142,245)
Options outstanding at end of period 1,300 $551,082
7. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-
term securities, were $108,515,915 and $45,924,542,
respectively, in 1998.
The components of the net unrealized appreciation in the value
of the investments held at December 31, 1998 for both financial
reporting and tax purposes are as follows:
Gross unrealized appreciation of investments $45,607,818
Gross unrealized depreciation of investments (12,036,994)
Net unrealized appreciation of investments $33,570,824
8. 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 measurements,
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 to the Independent Auditors,
transfer agent fees and fund accounting.
The following is an analysis of commissions credits generated,
utilized and available to pay future expenses of the Fund:
Balance, January 1, 1997 $(2,452)
Commission credits generated in 1998 74,312
Commission credits utilized:
Auditor fees $(15,100)
Transfer agent fees (40,567)
Fund accounting (2,343)
(58,010)
Balance, December 31, 1998 $(13,850)
Annual fund operating expenses, as a percentage of average net
assets, were 1.36% without the commission credits. Utilizing
commission credits, operating expenses as a percentage of
average net assets were 1.32%.
* * * * * *
