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cde
WSIS SERIES TRUST
Wertheim Equity
Value Fund
Wertheim Small
Capitalization Value
Fund
Wertheim High Yield
Income Fund
Wertheim Investment
Grade Income Fund
WSIS Series Trust
P.O. Box 8507
Wertheim Short-Term
Boston, Mass. 02266
Investment Fund
1-800-464-3108
1096WS
ANNUAL REPORT
October 31, 1996
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WSIS SERIES TRUST
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INVESTMENT MANAGER
Schroder Wertheim Investment Services, Inc. is an indirect wholly owned
subsidiary of Schroders plc. Founded in 1927 as Wertheim & Co., the firm was
renamed in 1995 following integration with the Schroder Investment Management
Group which manages in excess of $100 billion for clients globally. The new
organization now has an expanded capital base as well as total global
representation in financial markets. As of October 31, 1996, Schroder Wertheim
Investment Services, Inc. had over $4 billion in assets under management.
December 12, 1996
Dear Shareholder:
We are pleased to present the financial statements for WSIS Series Trust for the
fiscal year ended October 31, 1996. This fiscal year has seen the continuation
of last year's strong returns in U.S. financial markets, with equities in
particular performing well. The S&P 500 Index has risen over 24% this year after
gaining over 26% last year, and fixed income investments have also exceeded cash
returns for the second year running. A benign economic background, reflected in
steady GDP growth and low inflation, has underpinned these gains, as has the
combination of good corporate profits growth. This has allowed market valuations
to expand.
The last two years have produced unusually strong gains in U.S. financial
markets; at times these have appeared particularly ebullient and bullish. While
our overall view remains very constructive on the long term outlook for markets
and the economy as a whole, we do believe that U.S. markets face more
challenging circumstances in the coming year, and believe that an approach which
stresses the evaluation of downside risk as well as upside potential will become
increasingly important. Our disciplined approach to security valuation should
serve well in this environment, whereas in more "momentum" driven markets it can
receive less attention from investors at large.
We expect 1997 to be a year in which there are few dramatic changes in the tone
of the economy or to the inflation outlook. We believe that growth of around 2
1/2% is likely, driven more by capital and manufacturing areas of the economy
than by the consumer sector, although with solid contributions from both. We do
expect international demand, and hence export growth, to be a bigger factor in
1997 than in 1996, and we are concerned that a fairly tight labor market will
exert modest upward pressure on core inflation. Hence we expect interest rates
to start to rise, probably in the spring of 1997, but stress that a sharp or
protracted period of rate increases is unlikely. This, in conjunction with
slower corporate profits growth as the economic cycle ages, could lead to more
volatility in markets than we have seen for some time. Focus on downside
protection during such periods will be important. We believe that our Funds'
holdings are well-positioned to weather such a period, and that certain areas of
the market which have lagged this year's upturn remain an attractive value. We
do not see evidence of the excesses in market valuation, sentiment or the
economy, such as large inventory
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WSIS SERIES TRUST
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accumulation, which typically would cause us to become pessimistic and which can
signal major market tops. The secular trends for both interest rates and
inflation remain good, heavily influenced by demographic factors which should
constrain nominal growth and boost productivity. This should make the prospects
for long term investors favorable.
We thank you for your continued support and interest in WSIS Series Trust.
Sincerely,
<TABLE>
<S> <C>
[LOGO] [LOGO]
David Gibson Jane P. Lucas
Vice President Vice President
</TABLE>
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2
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WERTHEIM EQUITY VALUE FUND
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WERTHEIM EQUITY VALUE FUND
PORTFOLIO AND STRATEGY REVIEW AS OF OCTOBER 31, 1996
An overall trend of modest economic growth and a relatively mild inflation
outlook produced further strong equity market returns over the twelve month
period ended October 31, 1996. For fiscal year ended October 31, the Wertheim
Equity Value Fund was up 19.30% versus 24.09% for the S&P 500. At fiscal year
end, net assets of the Fund were $42,905,259. Investments were 96.5% equities
and 3.5% cash and other net assets.
Amid the market's advance, however, investor sentiment exhibited varied
enthusiasm both for the market as a whole and for its sector components, as
opinion regarding the pace of economic growth, potential Federal Reserve Bank
action, and future corporate profitability shifted between extremes. Early in
the fiscal year, fears of an impending recession favored financial and consumer
staple stocks. As signs of economic strength multiplied, economically sensitive
issues in the consumer cyclical and capital goods sectors excelled until the
report of strong June employment data and consequent fears of aggressive Federal
Reserve Bank monetary tightening triggered a significant market sell-off in
July. Subsequent indications that the economy was not growing at a pace fast
enough to force the Federal Reserve Bank to raise short term rates produced a
robust market recovery and again attracted investors to financial stocks and
pharmaceutical stocks. Our reduction by nearly half in consumer cyclical
holdings before June proved beneficial to relative performance. Overall, an
underweighting in financials, as well as our emphasis within this sector on
insurance rather than bank stocks, constrained performance, as did a significant
underweighting in pharmaceutical company issues. Finally, selected holdings in
technology, whose sector performance was tied to the market's perception of
industry prospects rather than macro-economic factors, were a detriment to
performance in the third quarter but had a positive impact in the final quarter.
In accordance with our economic outlook as discussed in the Letter to
Shareholders, the Fund portfolio remains overweighted relative to the market in
capital goods stocks, particularly those with superior earnings visibility and
exposure to improving international economics. We continue to limit our holdings
in consumer cyclical stocks, especially those most sensitive to discretionary
consumer spending. Our exposure to multi-national drug companies will increase
modestly but will, nevertheless, be significantly below that of the market's as
valuations appear high for many of the leading stocks. Our position in
technology also remains above that of the market in issues where we anticipate
accelerating demand to benefit both earnings and valuations.
A review of selected purchases and sales during the year provides an example of
our investment process. In April 1996, both INTEL CORPORATION and SEAGATE
TECHNOLOGY fit our criteria for purchase in the technology sector, and both
provided a positive contribution to performance. Each of the companies has a
dominant position in the markets they serve, INTEL in personal computer
processors and SEAGATE in storage devices. Both of these markets would be
beneficiaries of accelerating demand in personal computers. Most importantly,
INTEL at less than twelve times projected 1997 earnings at the time of purchase
and SEAGATE at less than nine times projected 1997 earnings represented
extremely attractive values. As of the end of October, INTEL was up over 75%
from its average purchase price and SEAGATE 24%. CPC INTERNATIONAL, INC., a
major multi-national food company, also contributed positively to performance
since its initial purchase late in June. At less than fifteen and one-half times
its projected 1997 earnings, CPC offered relatively stable earnings growth at a
significant discount to many of its consumer staple peers.
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3
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WERTHEIM EQUITY VALUE FUND
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As alluded to above, notable sales were concentrated in the consumer cyclical
sector and included MAY DEPARTMENT STORES COMPANY, DILLARD DEPARTMENT STORES,
INC., and GENERAL MOTORS CORPORATION. In the case of GENERAL MOTORS, we believe
that there is little scope for improvement in the relatively high rate of auto
sales over the remainder of the cycle. We eliminated MAY and DILLARD from the
Fund portfolio in February and March respectively, after they had rallied from
mid-December lows. We felt then that their prices discounted a better economic
outcome than the modest growth rate in our forecast. From final elimination
through the end of October, all three stocks underperformed the market.
MANAGEMENT DISCUSSION
WHAT ROLE DOES CORPORATE RESTRUCTURING HAVE YET TO PLAY IN FUTURE CORPORATE
PROFITABILITY?
In recent years, corporate restructuring has played a large part in improved
earnings and individual stock price performance. Our feeling is that the bulk of
corporate restructuring is probably behind us and that companies will look to
top line growth for improved profitability. There are, nevertheless, a number of
cases where continued restructuring will significantly aid future earnings
growth and help drive stock price performance. MOBIL CORPORATION, a leading
international energy company, has already taken out approximately $760 million
in pre-tax costs since year end 1994. Some of these savings were masked recently
by a weak downstream environment in the third quarter. Looking forward, however,
future savings from a European refining and marketing joint venture with British
Petroleum, further staff redesign initiatives, revamped procurement procedures,
and other segment restructurings could add as much as $820 million in pre-tax
savings and lead to additional stock price appreciation. Another holding, JAMES
RIVER CORPORATION OF VIRGINIA, already demonstrated better quality earnings in
the third quarter from a de-emphasis of its commodity paper business. We expect
continued efforts there and further cost savings in its European tissue
operations to show additional earnings gains. ROCKWELL INTERNATIONAL CORPORATION
also, through the sale of its space and defense businesses, is now in a position
to buy back shares, releverage its existing businesses and obtain significant
earnings per share gains.
IN LIGHT OF THE SECTOR ROTATION AND SHIFTING MARKET SENTIMENT OVER THE PAST
YEAR, WHAT PRINCIPAL CHARACTERISTICS ARE YOU LOOKING FOR IN YOUR PURCHASES?
As always, we are seeking companies attractively priced relative to the market,
their industry peers, and their own historic valuations. In this environment,
though, we are focusing our purchases on companies that are not only
attractively priced but also in whose future earnings we have a basis for
confidence. An example of our strategy in this respect is the fiscal fourth
quarter purchase of Allstate Corporation, a leading property and casualty
insurance company. Good volume growth and lower loss costs afford the company
both relatively stable and visible earnings growth. At less than eleven times
next years projected earnings, the stock represented attractive value in
comparison to the market and its peer group.
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4
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WERTHEIM EQUITY VALUE FUND
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
IN WERTHEIM EQUITY VALUE FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EQUITY VALUE FUND S & P 500 INDEX
<S> <C> <C>
Jan-94 $10,000 $10,000
Feb-94 $9,960 $9,901
Mar-94 $9,450 $9,469
Apr-94 $9,510 $9,591
May-94 $9,730 $9,748
Jun-94 $9,400 $9,509
Jul-94 $9,700 $9,821
Aug-94 $9,980 $10,224
Sep-94 $9,490 $9,974
Oct-94 $9,450 $10,199
Nov-94 $9,080 $9,827
Dec-94 $9,214 $9,973
Jan-95 $9,426 $10,231
Feb-95 $9,890 $10,630
Mar-95 $10,051 $10,944
Apr-95 $10,313 $11,265
May-95 $10,575 $11,716
Jun-95 $10,787 $11,988
Jul-95 $11,200 $12,386
Aug-95 $11,331 $12,417
Sep-95 $11,522 $12,941
Oct-95 $11,210 $12,894
Nov-95 $11,825 $13,460
Dec-95 $11,820 $13,720
Jan-96 $12,227 $14,186
Feb-96 $12,458 $14,318
Mar-96 $12,656 $14,456
Apr-96 $12,788 $14,668
May-96 $12,876 $15,047
Jun-96 $12,744 $15,104
Jul-96 $12,228 $14,436
Aug-96 $12,503 $14,741
Sep-96 $13,107 $15,571
Oct-96 $13,383 $16,001
</TABLE>
The S&P 500 Index is a composite of the prices of 500 widely held U.S. stocks.
PERFORMANCE INFORMATION
<TABLE>
<CAPTION>
ONE YEAR ENDED
OCTOBER 31, INCEPTION TO
1996 OCTOBER 31, 1996*
--------------- -----------------
<S> <C> <C>
Wertheim Equity Value Fund........................................ 19.30% 11.35%
</TABLE>
* Average annual total return from commencement of operations (February 16,
1994)
"TOTAL RETURN" IS CALCULATED INCLUDING REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS. RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE
RESULTS. THE VALUE OF AN INVESTMENT IN THE FUND AND THE RETURN ON INVESTMENT
BOTH WILL FLUCTUATE AND REDEMPTION PROCEEDS MAY BE HIGHER OR LOWER THAN AN
INVESTOR'S ORIGINAL COST.
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5
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WERTHEIM EQUITY VALUE FUND
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Portfolio Characteristics as of October 31, 1996
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
Security % of Net Assets
<S> <C>
- --------------------------------------------------------
American International Group Inc. 4.4%
Colgate Palmolive Company 4.0%
Allied Signal Inc. 4.0%
General Electric Company 3.9%
BankAmerica Corporation 3.9%
Mobil Corporation 3.7%
Textron Inc. 3.7%
International Business Machines 3.6%
Amoco Corporation 3.3%
Wal Mart Stores Inc. 3.3%
-----
Total 37.8%
</TABLE>
INVESTMENT BY INDUSTRY
<TABLE>
<CAPTION>
Industry % of Net Assets
<S> <C>
- --------------------------------------------------------
Basic Industry 5.6%
Capital Goods 15.7%
Consumer Cyclical 8.2%
Consumer Staples 19.6%
Energy 12.0%
Financial 12.6%
Technology 13.3%
Telecommunications 2.4%
Transportation 2.2%
Utilities 4.9%
Cash Equivalents and Other Net Assets 3.5%
-------
Total 100.0%
</TABLE>
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6
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WERTHEIM SMALL CAPITALIZATION VALUE FUND
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WERTHEIM SMALL CAPITALIZATION VALUE FUND
PORTFOLIO AND STRATEGY REVIEW AS OF OCTOBER 31, 1996
The Wertheim Small Capitalization Value Fund was up 21.17% for the fiscal year
ended October 31, 1996, substantially outperforming its benchmark, the Russell
2000 Index, which rose 16.95% for the same period. On October 31, 1996 net
assets of the Fund totaled $48,614,184.
Small cap equities, in general, and the Fund, in particular, rebounded
vigorously following the harsh June and July stock market correction. Small cap
stocks outperformed large cap stocks from mid January to late May, but when the
general equity market correction began in late May, large capitalization stocks
reasserted market leadership as investors sought liquidity and high quality
growth companies. Management believes that small cap stocks are very attractive
again on a relative valuation basis. For example, the Fund has an unweighted
average price earnings ratio of 16.2x compared with 19.3x for the S & P 500 yet
management's projected earnings growth rate of Fund holdings is 18% compared
with 8% for the S & P 500.
Recently, the Fund has added to the energy and financial services sectors, while
continuing to reduce its consumer cyclical exposure. Fund management expects
corporate earnings growth to slow in 1997 because of low overall pricing power
and diminishing benefits of corporate restructuring. Accordingly, investment
ideas are sought where earnings power will be above average, yet remains
unrecognized. For example, ENERGY VENTURES, INC., a recent portfolio addition,
has been the consolidator of drill pipe for the past decade. Currently, it has a
55% worldwide market share and is now poised to benefit from rising demand with
1997 earnings expected to increase 100%. Further, because of a recent asset
sale, company management has $250 million ($11.36 per share) with which to make
accretive niche acquisitions. Currently trading at 13x our 1997 estimate of
$3.00, ENERGY VENTURES is at the beginning of a favorable oil service cycle,
which we believe will extend over the next few years.
Merger and acquisition activity is on the rise in large and small cap universes.
The strong stock market and the elongated economic cycle have generated the
attractively priced transaction currencies. Moreover, as internal cost savings,
which have driven above average earnings growth over the last few years, become
more difficult to effect, outside business combinations, which can often
eliminate duplicate operating expenses become increasingly attractive. These
trends are particularly relevant to the small cap value landscape where
attractive businesses are often available at reasonable (non dilutive) prices.
Two portfolio holdings were recently acquired at considerable premiums to our
cost: THE CONTINUUM COMPANY INC. (+44%) and GELMAN SCIENCES INC. (+60%).
Management never invests on the basis of hypothetical takeout price, and
acquisitions usually occur in the least expected portfolio holdings. When they
do occur, however, they are usually at a significant premium, enabling
quicker-than-normal gains. It is management's belief that our portfolio is
replete with attractive targets and should remain a beneficiary of occasional
tender offers if M&A activity continues or accelerates.
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7
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WERTHEIM SMALL CAPITALIZATION VALUE FUND
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MANAGEMENT DISCUSSION
SMALL CAP STOCKS HAVE UNDERPERFORMED YEAR-TO-DATE VERSUS LARGE CAP STOCKS. WHAT
IS THEIR OUTLOOK OVER THE NEXT 12-18 MONTHS?
Calendar year to date, the S&P 500 appreciation of 18.7% is over double that of
the Russell 2000 Index which is up 9.0%. Equity market strength in 1996 has been
driven by major capital inflows from institutional investors who have invested
in liquid, "blue chip" names. Large cap equity valuations are at the high end of
their historic absolute and relative ranges and significantly above current
small cap valuation levels. Historically, small cap returns have exceeded large
cap returns over market cycles because small cap companies exhibit higher long
term growth rates. We know that small cap valuations are very attractive
compared with large cap at current levels and would expect the valuation
disparity to correct over the next several quarters, enabling small cap stocks
to outperform large cap equities.
ARE YOU ABLE TO FIND GOOD INVESTMENT IDEAS IN THE CURRENT MARKET ENVIRONMENT?
Definitely. The new issue market has been extremely active over the past year
adding hundreds of new potential companies to the small cap universe. The large
cap market surge has been concentrated in quality, growth issues and seasoned
small cap companies have been left behind. Coverage of small cap companies is
low to non-existent as Wall Street analysts follow the largest companies in
their industries and their corporate finance departments' IPOs. We are finding
many excellent companies with strong track records and strong managements which
lack Wall Street sponsorship. We identify the best reward-to-risk ratios among
these and purchase those with a near term catalyst which will result in broader
investor recognition.
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8
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WERTHEIM SMALL CAPITALIZATION VALUE FUND
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
IN WERTHEIM SMALL CAPITALIZATION VALUE FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SMALL CAP VALUE FUND RUSSELL 2000 INDEX
<S> <C> <C>
Jan-94 $10,000 $10,000
Feb-94 $9,880 $9,982
Mar-94 $9,660 $9,455
Apr-94 $9,800 $9,511
May-94 $9,690 $9,404
Jun-94 $9,460 $9,084
Jul-94 $9,520 $9,233
Aug-94 $9,800 $9,748
Sep-94 $9,810 $9,716
Oct-94 $9,770 $9,676
Nov-94 $9,300 $9,287
Dec-94 $9,490 $9,537
Jan-95 $9,210 $9,416
Feb-95 $9,540 $9,808
Mar-95 $9,743 $9,977
Apr-95 $10,023 $10,198
May-95 $10,383 $10,374
Jun-95 $10,643 $10,912
Jul-95 $11,194 $11,541
Aug-95 $11,354 $11,780
Sep-95 $11,364 $11,990
Oct-95 $10,774 $11,454
Nov-95 $11,374 $11,935
Dec-95 $11,711 $12,251
Jan-96 $11,521 $12,237
Feb-96 $12,172 $12,619
Mar-96 $12,322 $12,880
Apr-96 $13,242 $13,569
May-96 $13,593 $14,104
Jun-96 $12,783 $13,524
Jul-96 $11,742 $12,343
Aug-96 $12,603 $13,061
Sep-96 $13,043 $13,571
Oct-96 $13,062 $13,362
</TABLE>
The Russell 2000 Index is a broad based measure of small capitalization U.S.
equity market performance.
PERFORMANCE INFORMATION
<TABLE>
<CAPTION>
ONE YEAR ENDED
OCTOBER 31, INCEPTION TO
1996 OCTOBER 31, 1996*
--------------- -----------------
<S> <C> <C>
Wertheim Small Capitalization Value Fund.......................... 21.17% 10.36%
</TABLE>
* Average annual total return from commencement of operations (February 16,
1994)
"TOTAL RETURN" IS CALCULATED INCLUDING REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS. RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE
RESULTS. THE VALUE OF AN INVESTMENT IN THE FUND AND THE RETURN ON INVESTMENT
BOTH WILL FLUCTUATE AND REDEMPTION PROCEEDS MAY BE HIGHER OR LOWER THAN AN
INVESTOR'S ORIGINAL COST.
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9
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WERTHEIM SMALL CAPITALIZATION VALUE FUND
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Portfolio Characteristics as of October 31, 1996
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
Security % of Net Assets
<S> <C>
- --------------------------------------------------------
Parker & Parsley Petroleum Company 4.0%
Data General Corporation 3.9%
R.P. Scherer Corporation 3.8%
OM Group Inc. 3.8%
Harland, John H. Co. 3.7%
Tuboscope Vetco International
Corporation 3.6%
Harman International Industries Inc. 3.6%
Wisconsin Central Transportation Co. 3.5%
Protective Life Corporation 3.4%
Burr-Brown Corporation 3.4%
-----
Total 36.7%
</TABLE>
INVESTMENT BY INDUSTRY
<TABLE>
<CAPTION>
Industry % of Net Assets
<S> <C>
- --------------------------------------------------------
Autos and Transportation 3.5%
Consumer Discretionary 2.8%
Consumer Staples 13.5%
Energy 16.1%
Financial 21.0%
Health Care 7.5%
Materials and Processing 9.3%
Producer Durables 8.5%
Technology 14.9%
Cash Equivalents and Other Net Assets 2.9%
-------
Total 100.0%
</TABLE>
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10
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WERTHEIM HIGH YIELD INCOME FUND
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WERTHEIM HIGH YIELD INCOME FUND
PORTFOLIO AND STRATEGY REVIEW AS OF OCTOBER 31, 1996
Over the twelve month period ended October 31, 1996, the Wertheim High Yield
Income Fund's total return was 9.98%, compared with the Salomon Brothers High
Yield Market Index which returned 11.06%. The underperformance was primarily due
to a combination of a generally more conservative approach to investing adopted
this year, along with modest price declines in some of the Fund's investments
which suffered from specific negative events. On October 31, 1996, the net
assets of the Fund were $15,454,2578 of which 95.5% was invested in high yield
bonds and the remaining 4.5% in cash equivalents and other net assets. Non-U.S.
issuers comprise less than 6% of the Fund.
During the fiscal year, management believed the economic outlook was for a
modestly stronger economy, driven primarily by lower unemployment and stronger
wage growth, leading to higher consumer spending. It was anticipated that
interest rates would rise in response to the better economy, while at the same
time there were concerns regarding prices of commodities such as steel and
paper, due to increased capacity and imports. In response to this outlook, over
the course of the year, the Fund reduced its exposure to the basic industry
sector, which includes chemicals, metals, paper and containers, from 18.6% to
6.0% as of October 31, 1996. Over the same period, in response to a stronger
consumer, exposure to the retail sector was increased from 0 to 8.4%.
Looking forward to fiscal 1997, management believes the outlook is for tighter
labor markets, leading to eventual wage pressures, and thus higher interest
rates. In the near term, the market appears comfortable that these wage
pressures alone will not trigger an increase in interest rates and waits for
more concrete signs of inflation. The high yield market has benefited from a
perception of reduced credit risk due to a low level of corporate bond defaults
and strong equity markets. It appears optimistic to forecast further improvement
in these trends in 1997. Given this outlook, along with the expectation of
higher interest rates, over the next six months the strategy of the Fund will be
to balance high credit quality, to protect against increases in default rate
trends and equity market reversals, with reduced vulnerability to increases in
interest rates through the use of "cushion" bonds (bonds trading to their next
call date) and to moderate the use of bonds trading at very tight yield spreads
over U.S. Treasury bonds.
A review of selected purchases and sales during the year provides an example of
our investment process. Late in 1995, the Fund added PANAMSAT CORPORATION, an
operator of satellite systems, attracted by their unique asset base and rapidly
growing cashflows. Since that time the Company has been purchased by a
subsidiary of HUGHES ELECTRONICS to add to the latter's own base of satellites
and the bonds are on upgrade watch by both Moodys and Standard & Poors. The
11.375% discount senior subordinated notes due 2003 were purchased at a yield of
9.47% and have provided a return of over 11.5%.
Early in 1996, management identified energy as an area with improving
fundamentals and began buying the 10.25% senior notes due 2004 of ENERGY
VENTURES, INC., an oil-well equipment manufacturer. For similar reasons, we
added PLAINS RESOURCES, INC., an oil and gas producer, purchasing the 10.25%
senior subordinated notes due 2006. Since these purchases, both bonds have risen
by three points in price.
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11
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WERTHEIM HIGH YIELD INCOME FUND
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Early in 1996, research indicated that the steel industry was having pricing
difficulties and had significant new capacity coming on line. In response, the
Fund sold its two steel investments, SHEFFIELD STEEL and GULF STATES STEEL. Both
companies have since reported weak profits and their bonds have languished at
levels below the selling prices. Research also indicated that many sectors of
the paper industry were experiencing very poor product pricing yet the bonds did
not reflect material weakness; the Fund sold its holding in RePap New Brunswick
for this reason and the bonds have since traded below the selling price as the
company reported sharply lower profits.
MANAGEMENT DISCUSSION
WHAT WILL BE THE INVESTMENT STRATEGY OF THE FUND IF INTEREST RATES BEGIN TO RISE
SHARPLY?
If rates are rising due to an overheating economy, where prices and corporate
profits are rising across the board, the Fund would underweight
interest-rate-sensitive issues, and overweight weaker credits which are less
responsive to changes in rates and more reliant on strong corporate profits. If
rates are rising due to the rising cost of components such as labor and energy
and the outlook for corporate profits is weak due to continued lack of pricing
power for services and final goods, the strategy would be to focus on higher
quality "cushion" bonds and to underweight weaker credits to reduce credit risk.
It is this latter outlook, and therefore strategy, which is currently favored by
management.
HOW ARE SELL DECISIONS MADE?
Sale decisions may be triggered simply because the price target for the security
has been reached and our analysis suggests that further upside performance is
limited. Sales may also result from changes in the outlook for interest rates,
industry fundamentals or specific issuers. When the interest rate outlook is
revised to a forecast of lower rates, the usefulness of "cushion" bonds is
typically diminished and exposure to those issues will be reduced. In cases
where the revised outlook is for higher interest rates, positions in highly
interest-sensitive securities are normally reduced. When a deterioration in
industry fundamentals is not fully reflected in price levels, exposure to
relevant industries may be reduced. Whenever a particular issuer's credit
profile deteriorates, regardless of positive industry fundamentals or favorable
bond structure, and the security price remains relatively unchanged, the issue
will typically be reduced or eliminated. In cases where there is a specific
event which negatively impacts the credit and results in an immediate drop in
the security price, the credit is reevaluated in light of the new price level
and increased volatility, but is not necessarily sold at that point in time.
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12
<PAGE>
- -----------------------------------------------------------------
WERTHEIM HIGH YIELD INCOME FUND
- -----------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
IN WERTHEIM HIGH YIELD INCOME FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH YIELD INCOME FUND SALOMON HIGH YIELD INDEX
<S> <C> <C>
Jan-94 $10,000 $10,000
Feb-94 $9,977 $9,957
Mar-94 $9,565 $9,587
Apr-94 $9,424 $9,499
May-94 $9,268 $9,533
Jun-94 $9,332 $9,543
Jul-94 $9,362 $9,637
Aug-94 $9,362 $9,691
Sep-94 $9,363 $9,665
Oct-94 $9,341 $9,667
Nov-94 $9,260 $9,561
Dec-94 $9,169 $9,668
Jan-95 $9,295 $9,807
Feb-95 $9,585 $10,134
Mar-95 $9,723 $10,239
Apr-95 $9,945 $10,480
May-95 $9,885 $10,792
Jun-95 $9,885 $10,869
Jul-95 $10,080 $10,999
Aug-95 $10,112 $11,067
Sep-95 $10,101 $11,196
Oct-95 $10,197 $11,290
Nov-95 $10,297 $11,393
Dec-95 $10,459 $11,574
Jan-96 $10,631 $11,744
Feb-96 $10,728 $11,817
Mar-96 $10,668 $11,758
Apr-96 $10,729 $11,754
May-96 $10,771 $11,820
Jun-96 $10,796 $11,911
Jul-96 $10,774 $11,988
Aug-96 $10,887 $12,113
Sep-96 $11,133 $12,396
Oct-96 $11,218 $12,539
</TABLE>
The Salomon Brothers High Yield Market Index is a composite of issues with
short, medium and long term maturities and quality ratings by S & P between BB
and CCC.
PERFORMANCE INFORMATION
<TABLE>
<CAPTION>
ONE YEAR ENDED
OCTOBER 31, INCEPTION TO
1996 OCTOBER 31, 1996*
--------------- -----------------
<S> <C> <C>
Wertheim High Yield Income Fund................................... 9.98% 4.33%
</TABLE>
* Average annual total return from commencement of operations (February 16,
1994)
"TOTAL RETURN" IS CALCULATED INCLUDING REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS. RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE
RESULTS. THE VALUE OF AN INVESTMENT IN THE FUND AND THE RETURN ON INVESTMENT
BOTH WILL FLUCTUATE AND REDEMPTION PROCEEDS MAY BE HIGHER OR LOWER THAN AN
INVESTOR'S ORIGINAL COST.
- --------------------------------------------------------------------------------
13
<PAGE>
- -----------------------------------------------------------------
WERTHEIM HIGH YIELD INCOME FUND
- -----------------------------------------------------------------
Portfolio Characteristics as of October 31, 1996
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
Security % of Net Assets
<S> <C>
- --------------------------------------------------------
Northwest Airlines Trust
NOTE 13.875% 6/21/08 3.8%
Intermedia Communications of Florida,
Inc.
NOTE 13.50% 6/01/05 3.5%
Energy Ventures Inc.
NOTE 10.25% 3/15/04 3.5%
Schuller International Group Inc.
NOTE 10.875% 12/15/04 3.4%
Host Marriott Travel Plazas Inc.
NOTE 9.50% 5/15/05 3.3%
Grand Casinos Inc.
MTG. 10.125% 12/01/03 3.2%
Carbide/Graphite Group Inc.
NOTE 11.50% 9/01/03 3.2%
Forecast Group
NOTE 11.375% 12/15/00 3.1%
Videotron Groupe Ltd.
NOTE 10.625% 2/15/05 3.1%
Sea Containers Ltd. "B"
NOTE 12.50% 12/01/04 3.0%
-----
Total 33.1%
</TABLE>
INVESTMENT BY INDUSTRY
<TABLE>
<CAPTION>
Industry % of Net Assets
<S> <C>
- --------------------------------------------------------
Basic Industry 6.0%
Capital Goods 3.0%
Consumer Cyclical 23.9%
Consumer Staples 11.4%
Energy 12.9%
Financial 2.4%
Media 19.2%
Transportation 8.7%
Utilities 8.2%
Cash Equivalents and Other Net Assets 4.3%
-------
Total 100.0%
</TABLE>
CREDIT QUALITY
<TABLE>
<CAPTION>
Rating % of Market Value of Investments
<S> <C>
- --------------------------------------------------------
BB 35%
B 59%
CCC 6%
NR 0%
-------
Total 100%*
</TABLE>
* Does not include Fund's investments in repurchase agreements determined by
SWIS to present minimal credit risk.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
WERTHEIM INVESTMENT GRADE INCOME FUND
- -----------------------------------------------------------------
WERTHEIM INVESTMENT GRADE INCOME FUND
PORTFOLIO AND STRATEGY REVIEW AS OF OCTOBER 31, 1996
For the fiscal year ended October 31, 1996, the Wertheim Investment Grade Income
Fund returned 4.38%, compared with the Lehman Brothers Government/Corporate
Index which returned 5.39% over the period. On October 31, 1996, net assets of
the Fund were $23,707,599.
During the fiscal year, management's outlook for fixed income markets resulted
in the implementation of several policy changes. Management's economic forecasts
suggested that growth would be moderate (but greater than consensus) during the
fiscal year and that inflation would be moderately higher than in the prior
fiscal year. Corporate profit growth was expected to be at a slower rate. Within
the fixed income markets, yield spreads between corporate issues and U.S.
Treasury issues of similar maturity continued to narrow. For the first time in
nearly five years, generic mortgage pass-through securities began to yield more
than generic Baa/BBB corporate issues. Based on management's analysis of the
economic environment and the shifting relative values available in markets, the
portfolio was repositioned. Corporate issues were reduced in favor of mortgage
issues and the overall credit quality of the remaining corporates was increased.
As of October 31, 1996, corporate issues were reduced to 35% of the Fund from
49% the previous year, while mortgage-backed securities were increased to 15%
from 1% for the same period. In 1996, U.S. Agency issues continued to represent
attractive alternatives to U.S. Treasury or high quality corporate issues. The
U.S. Agency sector holding was increased further during the review period,
reaching 12% by October 31, 1996 from 8% a year ago. The portfolio's duration
(statistical measure of price volatility) was reduced to nearly 10% less than
the Index's duration, reflecting management's growing concerns that inflationary
pressures were building and that higher bond yields were likely to ensue. As we
begin the new fiscal year, management believes the portfolio is well-positioned,
but anticipates that it will further reduce corporate holdings in favor of
mortgage securities.
MANAGEMENT DISCUSSION
WHAT IMPACT ARE THE RECENT U.S. ELECTIONS EXPECTED TO HAVE ON THE DIRECTION OF
YIELDS?
The longer term direction of yields is primarily determined by the rate of
economic growth, the anticipated level of inflation and the likely course of
monetary policy. By virtually maintaining the status quo in the recent
elections, nothing is likely to dramatically change the outlook for these
variables. If growth remains above the long term trend, as it is currently,
inflation pressures may be expected to develop, resulting in higher yields.
WHAT AFFECT WOULD A BALANCED BUDGET HAVE ON THE FUND?
A congressional agreement to balance the budget by the year 2002 is possible in
1997. During the recent campaign season, both parties reiterated their desire to
reach a balanced budget. In 1992, the federal budget deficit peaked at $290
billion and has declined significantly on an annual basis to its current level
of $125 billion. In 1996, the inability of both parties to reach agreement on
the balanced budget caused two government shutdowns prior to an April
compromise. By balancing the budget, Federal demands for funds would be
significantly reduced. The financial markets would, therefore, react positively.
This reaction would, in turn, cause yields to decline and investments purchased
by the Fund to realize more appreciation thereby improving total return.
- --------------------------------------------------------------------------------
15
<PAGE>
- -----------------------------------------------------------------
WERTHEIM INVESTMENT GRADE INCOME FUND
- -----------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
IN WERTHEIM INVESTMENT GRADE INCOME FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INVESTMENT GRADE INCOME FUND LEHMAN BROTHERS GOV...T CORP INDEX
<S> <C> <C>
Jan-94 $10,000 $10,000
Feb-94 $9,968 $9,945
Mar-94 $9,708 $9,701
Apr-94 $9,578 $9,621
May-94 $9,548 $9,604
Jun-94 $9,502 $9,581
Jul-94 $9,696 $9,773
Aug-94 $9,689 $9,777
Sep-94 $9,526 $9,629
Oct-94 $9,511 $9,619
Nov-94 $9,492 $9,601
Dec-94 $9,567 $9,665
Jan-95 $9,727 $9,850
Feb-95 $9,983 $10,079
Mar-95 $10,047 $10,146
Apr-95 $10,186 $10,288
May-95 $10,626 $10,720
Jun-95 $10,700 $10,805
Jul-95 $10,643 $10,763
Aug-95 $10,771 $10,901
Sep-95 $10,859 $11,012
Oct-95 $10,996 $11,174
Nov-95 $11,168 $11,358
Dec-95 $11,319 $11,525
Jan-96 $11,398 $11,597
Feb-96 $11,161 $11,351
Mar-96 $11,069 $11,256
Apr-96 $10,974 $11,178
May-96 $10,931 $11,159
Jun-96 $11,058 $11,307
Jul-96 $11,072 $11,333
Aug-96 $11,049 $11,305
Sep-96 $11,236 $11,506
Oct-96 $11,477 $11,774
</TABLE>
The Lehman Brothers Government/Corporate Index is a composite of investment
grade issues with maturities greater than one year.
PERFORMANCE INFORMATION
<TABLE>
<CAPTION>
ONE YEAR ENDED
OCTOBER 31, INCEPTION TO
1996 OCTOBER 31, 1996*
--------------- -----------------
<S> <C> <C>
Wertheim Investment Grade Income Fund............................. 4.38% 5.25%
</TABLE>
* Average annual total return from commencement of operations (February 22,
1994)
"TOTAL RETURN" IS CALCULATED INCLUDING REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS. RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE
RESULTS. THE VALUE OF AN INVESTMENT IN THE FUND AND THE RETURN ON INVESTMENT
BOTH WILL FLUCTUATE AND REDEMPTION PROCEEDS MAY BE HIGHER OR LOWER THAN AN
INVESTOR'S ORIGINAL COST.
- --------------------------------------------------------------------------------
16
<PAGE>
- -----------------------------------------------------------------
WERTHEIM INVESTMENT GRADE INCOME FUND
- -----------------------------------------------------------------
Portfolio Characteristics as of October 31, 1996
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
Security % of Net Assets
<S> <C>
- --------------------------------------------------------
U.S. Treasury Note 8.5%
6.125% 05/15/98
U.S. Treasury Note 5.6%
7.250% 08/15/04
U.S. Treasury Note 5.3%
6.500% 08/15/05
U.S. Treasury Note 4.2%
7.500% 10/31/99
U.S. Treasury Note 3.9%
7.375% 11/15/97
FNMA 3.0%
6.400% 09/27/05
Lucent Technologies Inc. 3.0%
6.900% 07/15/01
FHLB 2.9%
6.225% 10/24/05
FNMA PL# 303909 2.8%
7.000% 05/01/26
Ford Motor Credit Company 2.8%
6.250% 12/08/05
-----
Total 42.0%
</TABLE>
INVESTMENT BY SECTOR
<TABLE>
<CAPTION>
Sector % of Net Assets
<S> <C>
- --------------------------------------------------------
Corporate Notes 35.2%
Government Agencies 12.0%
Mortgages 14.6%
U.S. Treasury Issues 31.5%
Cash Equivalents and Other Net Assets 6.7%
-------
Total 100.0%
</TABLE>
CREDIT QUALITY
<TABLE>
<CAPTION>
Rating % of Market Value of Investments
<S> <C>
- --------------------------------------------------------
U.S. Treasury Issues 33%
Government Agencies 27%
AAA 2%
AA 5%
A 24%
Baa 9%
----
Total 100%
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
WERTHEIM SHORT-TERM INVESTMENT FUND
- -----------------------------------------------------------------
WERTHEIM SHORT-TERM INVESTMENT FUND
PORTFOLIO AND STRATEGY REVIEW AS OF OCTOBER 31, 1996
For the fiscal year ended October 31, 1996, the Wertheim Short-Term Investment
Fund realized a total return of 4.63%, compared to 5.32% for the 90 day U.S.
Treasury Bill. At year end, net assets of the Fund were $30,526,568.
Management's forecasts suggested that economic growth would be moderate (but
greater than consensus) during the fiscal year ended October 31, 1996, and that
inflation would be moderately higher than in fiscal year 1995. The money market
yield curve (the level of yields at different maturity points) on November 1,
1995 was flat at 5.5% and was projecting no change in monetary policy by the
Federal Reserve. During the fiscal year, the bond and money markets began to
anticipate some shift in policy by the Federal Reserve. At fiscal year end, six
month U.S. Treasury Bills yielded 30 basis points more than three month Bills
which was consistent with the market's expectations of a minor policy
adjustment. Management implemented a strategy to utilize the positive slope of
the yield curve to enhance the Fund's return. The resulting structure
successfully captured extra yield with minimal lengthening in the Fund's average
maturity.
Management's continuing research efforts have identified several opportunities
to add value within the money markets. At fiscal year end, for example,
attractive yield premiums had developed between asset-backed securities and U.S.
Treasury Bills. Management is in the process of adding holdings in this sector,
and on October 31, 1996, they were 5% of Fund assets.
- --------------------------------------------------------------------------------
18
<PAGE>
- -----------------------------------------------------------------
WERTHEIM SHORT-TERM INVESTMENT FUND
- -----------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
IN WERTHEIM SHORT-TERM INVESTMENT FUND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENT FUND 90 DAY TREASURY BILL
<S> <C> <C>
Jan-94 $10,015 $10,018
Feb-94 $9,995 $10,045
Mar-94 $9,998 $10,075
Apr-94 $9,957 $10,107
May-94 $10,006 $10,144
Jun-94 $10,047 $10,180
Jul-94 $10,067 $10,218
Aug-94 $10,114 $10,257
Sep-94 $10,143 $10,298
Oct-94 $10,183 $10,340
Nov-94 $10,203 $10,387
Dec-94 $10,246 $10,436
Jan-95 $10,292 $10,489
Feb-95 $10,348 $10,541
Mar-95 $10,382 $10,593
Apr-95 $10,445 $10,645
May-95 $10,497 $10,697
Jun-95 $10,538 $10,747
Jul-95 $10,572 $10,798
Aug-95 $10,625 $10,847
Sep-95 $10,656 $10,896
Oct-95 $10,695 $10,945
Nov-95 $10,736 $10,995
Dec-95 $10,779 $11,044
Jan-96 $10,832 $11,091
Feb-96 $10,859 $11,137
Mar-96 $10,900 $11,184
Apr-96 $10,927 $11,235
May-96 $10,996 $11,283
Jun-96 $11,006 $11,333
Jul-96 $11,058 $11,383
Aug-96 $11,100 $11,432
Sep-96 $11,140 $11,482
Oct-96 $11,193 $11,531
</TABLE>
The 90 Day U.S. Treasury Bill return is an average return on the three month
U.S. Treasury Bills.
PERFORMANCE INFORMATION
<TABLE>
<CAPTION>
ONE YEAR ENDED
OCTOBER 31, INCEPTION TO
1996 OCTOBER 31, 1996*
--------------- -----------------
<S> <C> <C>
Wertheim Short-Term Investment Fund............................... 4.63% 4.09%
</TABLE>
* Average annual total return from commencement of operations (January 11, 1994)
"TOTAL RETURN" IS CALCULATED INCLUDING REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS. RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE
RESULTS. THE VALUE OF AN INVESTMENT IN THE FUND AND THE RETURN ON INVESTMENT
BOTH WILL FLUCTUATE AND REDEMPTION PROCEEDS MAY BE HIGHER OR LOWER THAN AN
INVESTOR'S ORIGINAL COST.
- --------------------------------------------------------------------------------
19
<PAGE>
- -----------------------------------------------------------------
WERTHEIM SHORT-TERM INVESTMENT FUND
- -----------------------------------------------------------------
Portfolio Characteristics as of October 31, 1996
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
Security % of Net Assets
<S> <C>
- --------------------------------------------------------
Ford Credit Auto Loan 92-1A 4.9%
6.875% 1/15/99
Mobil Corporation Note 4.9%
6.5% 2/15/97
SLMA Medium Term Note 4.9%
6.00% 10/21/97
John Deere Capital Corporation 4.9%
C/P 11/5/96
General Electric Capital Corporation 4.9%
C/P 11/20/96
FHLB 4.9%
DISC. NOTE 3/3/97
FHLB 4.9%
DISC. NOTE 12/6/96
U.S. Treasury Note 4.9%
5.125% 2/28/98
duPont E I de Nemours & Company 4.9%
C/P 12/18/96
FNMA 4.9%
DISC. NOTE 1/2/97
-----
Total 49.0%
</TABLE>
INVESTMENT BY SECTOR
<TABLE>
<CAPTION>
Sector % of Net Assets
<S> <C>
- --------------------------------------------------------
Asset and Mortgage Backed Issues 8.3%
Commercial Paper 29.2%
Corporate Notes 4.9%
Government Agencies 51.8%
U.S. Treasury Issues 4.9%
Cash Equivalents and Other Net Assets 0.9%
-------
Total 100.0%
</TABLE>
CREDIT QUALITY
<TABLE>
<CAPTION>
Rating % of Market Value of Investments
<S> <C>
- --------------------------------------------------------
U.S. Treasury/Agency 60%
AAA 35%
AA 5%
----
Total 100%
</TABLE>
- --------------------------------------------------------------------------------
20
<PAGE>
- --------------------------------------------------------------------------------
WSIS SERIES TRUST
- -----------------------------------------------------------------
PERFORMANCE INFORMATION
<TABLE>
<CAPTION>
ONE YEAR ENDED INCEPTION TO
SEPTEMBER 30, 1996 SEPTEMBER 30, 1996*
------------------ -------------------
<S> <C> <C>
Wertheim Equity Value Fund.................................. 13.70% 10.86%
Wertheim Small Capitalization Value Fund.................... 14.72% 10.65%
Wertheim High Yield Income Fund............................. 10.19% 4.17%
Wertheim Investment Grade Income Fund....................... 3.48% 4.57%
Wertheim Short-Term Investment Fund......................... 4.95% 4.05%
</TABLE>
* From commencement of operations (February 16, 1994 for Wertheim Equity Value
Fund, Wertheim Small Capitalization Value Fund and Wertheim High Yield Income
Fund; February 22, 1994 for Wertheim Investment Grade Income Fund and January
11, 1994 for Wertheim Short-Term Investment Fund)
"TOTAL RETURN" IS CALCULATED INCLUDING REINVESTMENT OF ALL INCOME DIVIDENDS.
RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE RESULTS. THE VALUE
OF AN INVESTMENT IN A FUND AND THE RETURN ON INVESTMENT BOTH WILL FLUCTUATE AND
REDEMPTION PROCEEDS MAY BE HIGHER OR LOWER THAN AN INVESTOR'S ORIGINAL COST.
THE VIEWS EXPRESSED IN THIS REPORT WERE THOSE OF THE FUND'S PORTFOLIO MANAGERS
AS OF THE DATES SPECIFIED, AND MAY NOT REFLECT THE VIEWS OF THE PORTFOLIO
MANAGERS ON THE DATE THIS REPORT IS FIRST PUBLISHED OR ANY TIME THEREAFTER.
THESE VIEWS ARE INTENDED TO ASSIST SHAREHOLDERS OF THE FUNDS IN UNDERSTANDING
THEIR INVESTMENTS IN THE FUNDS AND DO NOT CONSTITUTE INVESTMENT ADVICE;
INVESTORS SHOULD CONSULT THEIR OWN INVESTMENT PROFESSIONALS AS TO THEIR
INDIVIDUAL INVESTMENT PROGRAMS.
- --------------------------------------------------------------------------------
21
<PAGE>
- --------------------------------------------------------------------------------
WERTHEIM EQUITY VALUE FUND
- -----------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Shares Value $
--------- -----------
<C> <S> <C>
COMMON STOCKS
BASIC INDUSTRY - (5.6%)
18,300 Ferro Corporation 494,100
31,800 James River Corporation of Virginia 1,001,700
16,500 Reynolds Metals Company 928,125
-----------
2,423,925
CAPITAL GOODS - (15.7%)
26,100 Allied Signal, Incorporated 1,709,550
17,400 General Electric Company 1,683,450
16,600 McDonnell Douglas Corporation 904,700
15,500 Rockwell International Corporation 852,500
17,700 Textron, Incorporated 1,570,875
-----------
6,721,075
CONSUMER CYCLICAL - (8.2%)
28,800 Time Warner, Incorporated 1,072,800
31,900 Viacom, Incorporated (1) 1,040,738
53,100 Wal Mart Stores, Incorporated 1,413,787
-----------
3,527,325
CONSUMER STAPLES - (19.6%)
26,300 Albertson's, Incorporated 904,063
18,700 Colgate Palmolive Company 1,720,400
15,500 CPC International, Incorporated 1,222,562
36,800 Heinz H J Company 1,306,400
10,700 Kimberly Clark Corporation 997,775
34,300 Pharmacia & Upjohn, Incorporated 1,234,800
29,600 Rite Aid Corporation 1,006,400
-----------
8,392,400
ENERGY - (12.0%)
17,500 Amerada Hess Corporation 969,063
18,700 Amoco Corporation 1,416,525
18,400 Chevron Corporation 1,209,800
<CAPTION>
Shares Value $
--------- -----------
<C> <S> <C>
ENERGY - (CONTINUED)
13,500 Mobil Corporation 1,576,125
-----------
5,171,513
FINANCE - (12.6%)
13,900 Allstate Corporation 780,137
17,200 American International Group,
Incorporated 1,868,350
18,100 BankAmerica Corporation 1,656,150
7,500 General Reinsurance Corporation 1,104,375
-----------
5,409,012
TECHNOLOGY - (13.3%)
38,700 Autodesk, Incorporated 885,263
10,900 Intel Corporation 1,197,637
12,100 International Business Machines 1,560,900
12,400 Linear Technology Corporation 415,400
25,000 LSI Logic Corporation (1) 662,500
14,500 Seagate Technology (1) 967,875
-----------
5,689,575
TELECOMMUNICATIONS - (2.4%)
21,000 AT&T Corporation 732,375
6,805 Lucent Technologies, Incorporated 319,835
-----------
1,052,210
TRANSPORTATION - (2.2%)
31,600 Ryder Systems, Incorporated 940,100
-----------
UTILITIES - (4.9%)
19,300 FPL Group, Incorporated 887,800
28,800 GTE Corporation 1,213,200
-----------
2,101,000
-----------
TOTAL COMMON STOCKS
(Cost $34,191,102) - 96.5% 41,428,135
-----------
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
WERTHEIM EQUITY VALUE FUND
- -----------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Principal
Amount $ Value $
--------- -----------
<C> <S> <C>
SHORT TERM INVESTMENT
REPURCHASE AGREEMENT - (5.9%)
2,520,000 State Street Bank and Trust Company
4.750% 11/01/1996 (2)
(Cost $2,520,000) 2,520,000
-----------
TOTAL INVESTMENTS
(Cost $36,711,102) - 102.4% 43,948,135
LIABILITIES IN EXCESS OF OTHER ASSETS -
(2.4)% (1,042,876)
-----------
NET ASSETS - 100.0% $42,905,259
-----------
-----------
</TABLE>
(1) Non-income producing security.
(2) The repurchase agreement, dated 10/31/96, with a repurchase price of
$2,520,333, is collateralized by a $2,470,000 United States Treasury Note,
6.50%, 5/31/01.
See notes to financial statements.
- --------------------------------------------------------------------------------
23
<PAGE>
- --------------------------------------------------------------------------------
WERTHEIM SMALL CAPITALIZATION VALUE FUND
- -----------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Shares Value $
--------- -----------
<C> <S> <C>
COMMON STOCKS
AEROSPACE - (2.9%)
63,000 Wyman Gordon Company (1) 1,386,000
-----------
BANKS - (4.5%)
23,000 Bank United Corporation (1) 612,375
70,000 Hibernia Corporation 778,750
7,354 Peoples Heritage Financial Group,
Incorporated 169,142
54,500 Sovereign Bancorp, Incorporated 640,375
-----------
2,200,642
BUSINESS SERVICES - (7.9%)
67,000 Jacobs Engineering Group, Incorporated
(1) 1,482,375
22,000 Keane, Incorporated (1) 1,020,250
21,800 Policy Management Systems Corporation
(1) 784,800
26,000 Right Management Consultants (1) 572,000
-----------
3,859,425
CHEMICALS - (7.1%)
21,000 Cambrex Corporation 656,250
24,500 Minerals Technologies, Incorporated 961,625
45,000 OM Group, Incorporated 1,845,000
-----------
3,462,875
COMPUTERS & BUSINESS
EQUIPMENT - (6.9%)
128,000 Data General Corporation (1) 1,904,000
65,000 Stratus Computer, Incorporated (1) 1,454,375
-----------
3,358,375
CONSUMER ELECTRONICS - (3.6%)
34,000 Harman International Industries,
Incorporated 1,746,750
-----------
<CAPTION>
Shares Value $
--------- -----------
<C> <S> <C>
DRUGS & HEALTH CARE - (4.7%)
17,900 Genesis Health Ventures, Incorporated
(1) 409,463
40,000 R. P. Scherer Corporation (1) 1,855,000
-----------
2,264,463
ELECTRONICS - (3.4%)
77,000 Burr-Brown Corporation (1) 1,636,250
-----------
FINANCIAL SERVICES - (2.5%)
8,500 Eaton Vance Corporation 371,875
12,800 Liberty Financial Companies,
Incorporated 449,600
6,500 United States Trust Corporation 404,625
-----------
1,226,100
GAS EXPLORATION - (7.1%)
68,000 Parker & Parsley Petroleum Company 1,955,000
99,000 Snyder Oil Corporation 1,509,750
-----------
3,464,750
HOTELS & RESTAURANTS - (1.0%)
29,000 RFS Hotel Investors, Incorporated 471,250
-----------
HOUSEHOLD PRODUCTS - (2.8%)
100,000 Dial Corporation New 1,375,000
-----------
INDUSTRIAL MACHINERY - (2.6%)
92,500 Gerber Scientific, Incorporated 1,248,750
-----------
INSURANCE - (11.9%)
37,000 Horace Mann Educators Corporation 1,267,250
48,000 Protective Life Corporation 1,656,000
55,000 Vesta Insurance Group, Incorporated 1,409,375
80,000 Western National Corporation 1,440,000
-----------
5,772,625
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
24
<PAGE>
- --------------------------------------------------------------------------------
WERTHEIM SMALL CAPITALIZATION VALUE FUND
- -----------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Shares Value $
--------- -----------
<C> <S> <C>
COMMON STOCKS
MANUFACTURING - (5.1%)
33,000 Aptargroup, Incorporated 1,064,250
46,000 Waters Corporation (1) 1,426,000
-----------
2,490,250
PETROLEUM SERVICES - (9.0%)
36,000 Energy Ventures, Incorporated (1) 1,584,000
34,000 Input/Output, Incorporated (1) 1,011,500
115,000 Tuboscope Vetco International
Corporation (1) 1,753,750
-----------
4,349,250
PUBLISHING - (3.7%)
58,000 Harland John H. Company 1,805,250
-----------
REAL ESTATE - (2.1%)
34,000 Beacon Properties Corporation 998,750
-----------
RETAIL TRADE - (1.8%)
22,000 TJX Companies, Incorporated 880,000
-----------
SOFTWARE - (3.0%)
136,000 Symantec Corporation (1) 1,479,000
-----------
<CAPTION>
Shares Value $
--------- -----------
<C> <S> <C>
TRANSPORTATION - (3.5%)
47,800 Wisconsin Central Transportation
Corporation (1) 1,720,800
-----------
TOTAL COMMON STOCKS
(Cost $38,228,921) - 97.1% 47,196,555
-----------
<CAPTION>
Principal
Amount $
---------
<C> <S> <C>
SHORT TERM INVESTMENT
REPURCHASE AGREEMENT - (6.2%)
3,025,000 State Street Bank and Trust Company
4.750% 11/01/1996 (2)
(Cost $3,025,000) 3,025,000
-----------
TOTAL INVESTMENTS
(Cost $41,253,921) - 103.3% 50,221,555
LIABILITIES IN EXCESS OF OTHER ASSETS -
(3.3)% (1,607,371)
-----------
NET ASSETS - 100.0% $48,614,184
-----------
-----------
</TABLE>
(1) Non-income producing security.
(2) The repurchase agreement, dated 10/31/96, with a repurchase price of
$3,025,399, is collateralized by a $2,965,000 United States Treasury Note,
6.50%, 5/31/01.
See notes to financial statements.
- --------------------------------------------------------------------------------
25
<PAGE>
- --------------------------------------------------------------------------------
WERTHEIM HIGH YIELD INCOME FUND
- -----------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Principal
Amount $ Value $
--------- -----------
<C> <S> <C>
CORPORATE BONDS
BASIC INDUSTRY - (6.3%)
450,000 Carbide/Graphite Group, Incorporated
11.500% 09/01/2003 489,375
550,000 Forecast Group 11.375% 12/15/2000 484,000
-----------
973,375
CABLE AND MEDIA - (13.8%)
275,000 CAI Wireless Systems, Incorporated
12.250% 09/15/2002 268,125
450,000 Comcast Corporation 9.500% 01/15/2008 447,750
200,000 Echostar Communications Corporation
11.364% 06/01/2004 (1) 159,000
425,000 Heartland Wireless Commerce,
Incorporated 13.000% 04/15/2003 456,875
435,000 Videotron Group Limited 10.625%
02/15/2005 476,325
350,000 Young Broadcasting, Incorporated 9.000%
01/15/2006 320,250
-----------
2,128,325
CASINOS - (6.0%)
500,000 Grand Casinos, Incorporated 10.125%
12/01/2003 491,875
225,000 Pioneer Finance Corporation 13.500%
12/01/1998 200,250
325,000 Santa Fe Hotel, Incorporated 11.000%
12/15/2000 230,750
-----------
922,875
<CAPTION>
Principal
Amount $ Value $
--------- -----------
<C> <S> <C>
CHEMICALS - (2.8%)
425,000 Freeport McMoran Resource, LP 8.750%
02/15/2004 433,500
-----------
CONSUMER/NON-
DURABLES - (10.3%)
300,000 CompUSA, Incorporated 9.500% 06/15/2000 308,250
275,000 Coty, Incorporated 10.250% 05/01/2005 293,563
325,000 Federated Department Stores,
Incorporated 8.500% 06/15/2003 338,813
300,000 Kash N' Karry Food Stores, Incorporated
11.500% 02/01/2003 300,750
325,000 Stater Brothers Holdings, Incorporated
11.000% 03/01/2001 345,312
-----------
1,586,688
ENERGY - (12.1%)
500,000 Energy Ventures, Incorporated
10.250% 03/15/2004 536,250
Flores & Rucks, Incorporated
75,000 9.750% 10/01/2006 77,062
350,000 13.500% 12/01/2004 412,125
100,000 Noble Drilling Corporation 9.125%
07/01/2006 105,750
400,000 Plains Resources, Incorporated
10.250% 03/15/2006 418,000
325,000 Veritas DGC, Incorporated 9.750%
10/15/2003 328,250
-----------
1,877,437
FINANCE - (2.4%)
365,000 Presidential Life Corporation 9.500%
12/15/2000 375,950
-----------
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
26
<PAGE>
- --------------------------------------------------------------------------------
WERTHEIM HIGH YIELD INCOME FUND
- -----------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Principal
Amount $ Value $
--------- -----------
<C> <S> <C>
CORPORATE BONDS
MANUFACTURING - (6.4%)
450,000 Guess, Incorporated 9.500% 08/15/2003 459,000
475,000 Schuller International Group,
Incorporated 10.875% 12/15/2004 524,875
-----------
983,875
PUBLISHING - (2.5%)
K-III Communications Corporation
275,000 10.250% 06/01/2004 286,000
100,000 10.625% 05/01/2002 105,000
-----------
391,000
SERVICES - (9.5%)
275,000 Abbey Healthcare Group, Incorporated
9.500% 11/01/2002 285,313
275,000 Healthsouth Corporation 9.500%
04/01/2001 292,875
500,000 Host Marriott Travel Plazas,
Incorporated 9.500% 05/15/2005 505,000
375,000 Universal Health Services, Incorporated
8.750% 08/15/2005 380,625
-----------
1,463,813
TRANSPORTATION - (11.6%)
300,000 CHC Helicopter Corporation 11.500%
07/15/2002 300,000
500,000 Northwest Airlines Trust 13.875%
06/21/2008 585,000
475,000 Sabreliner Corporation 12.500%
04/15/2003 447,687
<CAPTION>
Principal
Amount $ Value $
--------- -----------
<C> <S> <C>
TRANSPORTATION - (CONTINUED)
425,000 Sea Containers Limited Series B 12.500%
12/01/2004 463,250
-----------
1,795,937
UTILITIES - (11.8%)
475,000 Intermedia Communications of Florida,
Incorporated 13.500% 06/01/2005 542,687
275,000 Mobile Telecommunication Tech
Corporation 13.500% 12/15/2002 279,813
475,000 Paging Network, Incorporated
8.875% 02/01/2006 441,750
PanAmSat Corporation
150,000 7.935% 08/01/2003 (1) 137,250
300,000 9.750% 08/01/2000 317,250
100,000 Texas New Mexico Power Company 10.750%
09/15/2003 108,500
-----------
1,827,250
-----------
TOTAL CORPORATE BONDS
(Cost $14,481,245) - 95.5% 14,760,025
-----------
<CAPTION>
Shares
---------
<C> <S> <C>
WARRANT
TRANSPORTATION - (0.0%)
340 Sabreliner Corporation (2)
(Cost $2,289) - 0.0% 1,360
-----------
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
27
<PAGE>
- --------------------------------------------------------------------------------
WERTHEIM HIGH YIELD INCOME FUND
- -----------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Principal
Amount $ Value $
--------- -----------
<C> <S> <C>
SHORT TERM INVESTMENT
REPURCHASE AGREEMENT - (3.2%)
490,000 State Street Bank and Trust Company
4.750% 11/01/1996 (3)
(Cost $490,000) - 3.2% 490,000
-----------
TOTAL INVESTMENTS
(Cost $14,973,534) - 98.7% 15,251,385
OTHER ASSETS LESS LIABILITIES - 1.3% 202,872
-----------
NET ASSETS - 100.0% $15,454,257
-----------
-----------
</TABLE>
(1) Zero coupon bond. Coupon amount represents the yield to maturity.
(2) Pursuant to Rule 144A of the Securities Act of 1933, this security may be
resold in transactions exempt from registration, normally to qualified
institutional buyers. At October 31, 1996, this security aggregated $1,360,
or 0% of the net assets of the Fund.
(3) The repurchase agreement, dated 10/31/96, with a repurchase price of
$490,065, is collateralized by a $480,000 United States Treasury Note,
6.50%, 5/31/01.
See notes to financial statements.
- --------------------------------------------------------------------------------
28
<PAGE>
- --------------------------------------------------------------------------------
WERTHEIM INVESTMENT GRADE INCOME FUND
- -----------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Principal
Amount $ Value $
--------- -----------
<C> <S> <C>
GOVERNMENT AND
AGENCY SECURITIES
FEDERAL AGENCIES - (2.9%)
700,000 Federal Home Loan Bank Consolidated
Discount Notes
6.225% 10/24/2005 683,333
-----------
FEDERALLY CHARTERED - (9.1%)
Federal National Mortgage Association
650,000 6.250% 08/12/2003 634,530
500,000 6.320% 12/23/2003 488,190
330,000 6.360% 08/16/2000 332,274
725,000 6.400% 09/27/2005 716,249
-----------
2,171,243
U. S. GOVERNMENT
SECURITIES - (31.5%)
500,000 United States Treasury Bond 7.125%
02/15/2023 523,485
United States Treasury Notes
200,000 6.000% 08/31/1997 200,784
2,000,000 6.125% 05/15/1998 2,014,040
1,250,000 6.500% 08/15/2005 1,264,000
225,000 6.625% 06/30/2001 229,889
1,250,000 7.250% 08/15/2004 1,323,625
900,000 7.375% 11/15/1997 916,236
950,000 7.500% 10/31/1999 990,176
-----------
7,462,235
-----------
TOTAL GOVERNMENT
AND AGENCY SECURITIES
(Cost $10,138,522) - 43.5% 10,316,811
-----------
MORTGAGE BACKED
SECURITIES
COLLATERALIZED MORTGAGE
OBLIGATION - (1.1%)
250,000 Federal Home Loan Mortgage Corporation
6.000% 05/15/2008 244,168
-----------
<CAPTION>
Principal
Amount $ Value $
--------- -----------
<C> <S> <C>
MORTGAGE PASS-THROUGH
SECURITIES - (13.5%)
605,618 Federal Home Loan Mortgage Corporation
8.000% 01/01/2026 619,432
Federal National Mortgage Association
616,583 7.000% 12/01/2010 617,353
677,055 7.000% 05/01/2024 664,787
681,340 7.000% 05/01/2026 668,994
643,441 Government National Mortgage Association
6.500% 05/15/2009 636,402
-----------
3,206,968
-----------
TOTAL MORTGAGE BACKED SECURITIES
(Cost $3,402,972) - 14.6% 3,451,136
-----------
CORPORATE BONDS
CHEMICALS - (0.9%)
225,000 Mallinckrodt Group, Incorporated 6.500%
11/15/2007 217,283
-----------
FINANCE & BANKING - (21.1%)
350,000 Associates Corporation North America
6.400% 10/20/2002 348,107
400,000 Chrysler Financial Corporation 7.310%
03/24/1998 407,576
500,000 Citicorp
7.125% 09/01/2005 508,260
500,000 Dean Witter Discover & Company 6.875%
03/01/2003 506,690
Ford Motor Credit Company
700,000 6.250% 12/08/2005 667,324
200,000 9.250% 06/15/1998 210,130
500,000 General Electric Capital Corporation
7.875% 12/01/2006 541,730
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
29
<PAGE>
- --------------------------------------------------------------------------------
WERTHEIM INVESTMENT GRADE INCOME FUND
- -----------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Principal
Amount $ Value $
--------- -----------
<C> <S> <C>
CORPORATE BONDS
FINANCE & BANKING -
(CONTINUED)
General Motors Acceptance Corporation
300,000 6.750% 07/18/2003 300,918
250,000 6.750% 10/06/2003 250,800
100,000 NCNB Corporation 10.200% 07/15/2015 127,127
575,000 Pitney Bowes Credit Corporation 6.625%
06/01/2002 580,675
550,000 Sears Roebuck Acceptance Corporation
6.500% 10/04/2000 552,398
-----------
5,001,735
INDUSTRIALS - (2.7%)
650,000 Nabisco, Incorporated 7.050% 07/15/2007 639,866
-----------
INSURANCE - (1.7%)
400,000 Western National Corporation 7.125%
02/15/2004 403,884
-----------
LEISURE TIME - (2.6%)
575,000 Royal Caribbean Cruises Limited 8.250%
04/01/2005 613,260
-----------
OIL - (1.2%)
265,000 Chevron Corporation 8.110% 12/01/2004 285,760
-----------
<CAPTION>
Principal
Amount $ Value $
--------- -----------
<C> <S> <C>
TECHNOLOGY - (3.0%)
700,000 Lucent Technologies, Incorporated 6.900%
07/15/2001 712,775
-----------
TRANSPORTATION - (2.0%)
500,000 Burlington Northern Santa Fe
6.875% 02/15/2016 467,370
-----------
TOTAL CORPORATE BONDS
(Cost $8,226,229) - 35.2% 8,341,933
-----------
SHORT TERM INVESTMENT
REPURCHASE AGREEMENT - (5.4%)
1,287,000 State Street Bank and Trust Company
4.750% 11/01/1996 (1)
(Cost $1,287,000) - 5.4% 1,287,000
-----------
TOTAL INVESTMENTS
(Cost $23,054,723) - 98.7% 23,396,880
OTHER ASSETS LESS LIABILITIES - 1.3% 310,719
-----------
NET ASSETS - 100.0% $23,707,599
-----------
-----------
</TABLE>
(1) The repurchase agreement, dated 10/31/96, with a repurchase price of
$1,287,170, is collateralized by a $1,260,000 United States Treasury Note,
6.50%, 5/31/01.
See notes to financial statements.
- --------------------------------------------------------------------------------
30
<PAGE>
- --------------------------------------------------------------------------------
WERTHEIM SHORT-TERM INVESTMENT FUND
- -----------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Principa l
Amount $ Value $
--------- -----------
<C> <S> <C>
ASSET BACKED SECURITIES
AUTO LOAN - (5.3%)
1,500,000 Ford Credit Auto Loan Master Trust
6.875% 01/15/1999 1,504,080
124,865 General Motors Acceptance Corporation
Grantor Trust 4.150% 03/16/1998 124,944
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $1,627,981) - 5.3% 1,629,024
-----------
GOVERNMENT AND
AGENCY SECURITIES
COLLATERALIZED MORTGAGE
OBLIGATION - (3.0%)
901,359 Federal Home Loan Mortgage PC Guaranteed
5.000% 04/15/2002 897,988
-----------
FEDERAL AGENCIES - (27.7%)
Federal Home Loan Bank Consolidated
Discount Notes
1,000,000 5.240% 11/08/1996 998,981
1,500,000 5.290% 12/06/1996 1,492,285
1,500,000 5.310% 01/17/1997 1,483,926
1,500,000 5.480% 01/30/1997 1,480,988
1,520,000 5.500% 03/03/1997 1,493,884
1,500,000 Student Loan Marketing Association
Medium Term Note
6.000% 10/21/1997 1,503,030
-----------
8,453,094
<CAPTION>
Principa l
Amount $ Value $
--------- -----------
<C> <S> <C>
FEDERALLY CHARTERED - (24.1%)
Federal National Mortgage Association
Discount Notes
1,500,000 5.260% 04/16/1997 1,464,933
1,500,000 5.270% 04/07/1997 1,466,834
1,500,000 5.480% 03/07/1997 1,473,382
1,500,000 5.520% 01/02/1997 1,487,057
1,500,000 International Bank For Reconstruction &
Development Discount Note
5.490% 02/18/1997 1,476,974
-----------
7,369,180
U. S. GOVERNMENT
SECURITY - (4.9%)
1,500,000 United States Treasury Note 5.125%
02/28/1998 1,490,325
-----------
TOTAL GOVERNMENT AND AGENCY SECURITIES
(Cost $18,195,956) - 59.7% 18,210,587
-----------
CORPORATE BOND
OIL - (4.9%)
1,500,000 Mobil Corporation 6.500% 02/15/1997
(Cost $1,506,321) - 4.9% 1,503,975
-----------
COMMERCIAL PAPER
FINANCIAL SERVICES - (29.2%)
1,500,000 duPont E I de Nemours & Company 5.280%
12/18/1996 1,489,660
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
31
<PAGE>
- --------------------------------------------------------------------------------
WERTHEIM SHORT-TERM INVESTMENT FUND
- -----------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Principa l
Amount $ Value $
--------- -----------
<C> <S> <C>
COMMERCIAL PAPER
FINANCIAL SERVICES - (CONTINUED)
1,500,000 Ford Motor Credit Company 5.600%
01/21/1997 1,482,112
1,500,000 General Electric Capital Corporation
5.320% 11/20/1996 1,495,788
1,500,000 General Motors Acceptance Corporation
5.650% 02/03/1997 1,479,242
1,500,000 John Deere Capital Corporation 5.300%
11/05/1996 1,499,117
1,500,000 Sears Roebuck Acceptance Corporation
5.600% 03/24/1997 1,468,421
-----------
TOTAL COMMERCIAL PAPER
(Cost $8,910,169) - 29.2% 8,914,340
-----------
<CAPTION>
Principa l
Amount $ Value $
--------- -----------
<C> <S> <C>
OTHER SHORT TERM
INVESTMENT
REPURCHASE AGREEMENT - (0.9%)
271,000 State Street Bank and Trust Company
4.750% 11/01/1996 (1)
(Cost $271,000) - 0.9% 271,000
-----------
TOTAL INVESTMENTS
(Cost $30,511,427) - 100.0% 30,528,926
LIABILITIES IN EXCESS OF OTHER ASSETS -
0.0% (2,358)
-----------
NET ASSETS - 100.0% $30,526,568
-----------
-----------
</TABLE>
(1) The repurchase agreement, dated 10/31/96, with a repurchase price of
$271,036, is collateralized by a $270,000 United States Treasury Note,
6.50%, 5/31/01.
See notes to financial statements.
- --------------------------------------------------------------------------------
32
<PAGE>
- --------------------------------------------------------------------------------
WSIS SERIES TRUST
- -----------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
<TABLE>
<CAPTION>
SMALL INVESTMENT
EQUITY CAPITALIZATION HIGH YIELD GRADE SHORT-TERM
VALUE VALUE INCOME INCOME INVESTMENT
FUND FUND FUND FUND FUND
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments in securities, at value - Note
2........................................ $43,948,135 $50,221,555 $15,251,385 $23,396,880 $30,528,926
Cash....................................... 903 640 714 326 761
Dividends receivable....................... 27,795 5,965 4,250 0 0
Interest receivable........................ 333 399 433,923 354,185 70,636
Receivable for trust shares sold........... 74,807 24,041 9,615 422 0
Deferred organizational costs.............. 25,433 25,433 25,433 25,773 23,339
Prepaid expenses........................... 6,609 7,749 5,854 5,897 6,581
Due from Schroder Wertheim Investment
Services, Inc. - Note 3.................. 0 0 6,488 5,036 0
----------- ----------- ----------- ----------- -----------
TOTAL ASSETS........................... 44,084,015 50,285,782 15,737,662 23,788,519 30,630,243
LIABILITIES
Payable for securities purchased........... 1,091,948 1,568,960 109,624 0 0
Payable for trust shares redeemed.......... 0 0 103,093 15,097 35,795
Advisory fee payable - Note 3.............. 27,786 40,129 11,924 9,991 11,030
Accounts payable and accrued expenses...... 58,967 62,477 53,886 53,592 56,797
Dividends payable.......................... 55 32 4,878 2,240 53
----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES...................... 1,178,756 1,671,598 283,405 80,920 103,675
----------- ----------- ----------- ----------- -----------
NET ASSETS............................. $42,905,259 $48,614,184 $15,454,257 $23,707,599 $30,526,568
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
NET ASSETS
Capital paid-in............................ $33,121,798 $34,285,846 $16,393,321 $23,127,187 $30,613,531
Undistributed (distributions in excess of)
net investment income.................... 297,494 0 113,006 (8,068 ) (53)
Accumulated net realized gain (loss) on
investments.............................. 2,248,934 5,360,704 (1,329,921) 246,323 (104,409)
Net unrealized appreciation of
investments.............................. 7,237,033 8,967,634 277,851 342,157 17,499
----------- ----------- ----------- ----------- -----------
NET ASSETS............................. $42,905,259 $48,614,184 $15,454,257 $23,707,599 $30,526,568
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net asset value, offering and redemption
price per share.......................... $ 12.18 $ 13.05 $ 8.73 $ 9.70 $ 9.87
Total shares outstanding at end of year.... 3,523,397 3,724,100 1,769,543 2,443,666 3,093,871
Cost of securities......................... $36,711,102 $41,253,921 $14,973,534 $23,054,723 $30,511,427
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
33
<PAGE>
- --------------------------------------------------------------------------------
WSIS SERIES TRUST
- -----------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
SMALL
EQUITY CAPITALIZATION HIGH YIELD INVESTMENT SHORT-TERM
VALUE VALUE INCOME GRADE INCOME INVESTMENT
FUND FUND FUND FUND FUND
---------- -------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend income............................ $ 857,246 $ 406,079 $ 0 $ 0 $ 0
Interest income............................ 80,920 135,203 1,846,374 1,697,447 1,813,861
---------- -------------- ---------- ------------ -----------
TOTAL INCOME........................... 938,166 541,282 1,846,374 1,697,447 1,813,861
EXPENSES
Investment advisory fees - Note 3.......... 318,145 471,712 159,341 127,201 133,208
Administrative fees........................ 63,514 73,797 32,148 43,082 51,401
Custodian fees............................. 42,442 45,516 41,154 40,806 36,718
Audit fees................................. 16,028 16,028 16,028 16,028 16,028
Legal fees................................. 12,000 12,000 12,000 12,000 12,000
Printing expenses.......................... 6,056 6,056 6,056 6,056 5,944
Trustees fees.............................. 7,600 7,600 7,600 7,600 7,600
Transfer agent fees........................ 39,707 39,707 34,846 32,902 39,707
Organizational expenses.................... 9,647 9,647 9,647 9,647 9,647
Registration fees.......................... 14,706 18,997 12,412 13,996 11,910
Insurance.................................. 6,232 6,810 2,436 3,712 4,310
Other...................................... 1,723 3,268 1,395 4,148 2,199
Expenses borne by Schroder Wertheim
Investment Services, Inc. - Note 3....... 0 0 (59,514) (29,635) 0
---------- -------------- ---------- ------------ -----------
TOTAL EXPENSES......................... 537,800 711,138 275,549 287,543 330,672
---------- -------------- ---------- ------------ -----------
NET INVESTMENT INCOME (LOSS)........... 400,366 (169,856) 1,570,825 1,409,904 1,483,189
---------- -------------- ---------- ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments.... 2,347,661 5,532,400 381,591 246,670 (1,966)
Change in net unrealized appreciation
(depreciation) of investments............ 4,535,784 4,106,542 (233,227) (654,055) 3,256
---------- -------------- ---------- ------------ -----------
NET GAIN (LOSS)............................ 6,883,445 9,638,942 148,364 (407,385) 1,290
---------- -------------- ---------- ------------ -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................. $7,283,811 $9,469,086 $1,719,189 $1,002,519 $ 1,484,479
---------- -------------- ---------- ------------ -----------
---------- -------------- ---------- ------------ -----------
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
34
<PAGE>
(This page has been left blank intentionally)
- --------------------------------------------------------------------------------
35
<PAGE>
- --------------------------------------------------------------------------------
WSIS SERIES TRUST
- -----------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
OCTOBER 31, 1996
<TABLE>
<CAPTION>
SMALL CAPITALIZATION
EQUITY VALUE FUND VALUE FUND
-------------------------- --------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/96 10/31/95 10/31/96 10/31/95
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
From operations:
Net investment income
(loss).................. $ 400,366 $ 422,381 $ (169,856) $ (105,500)
Net realized gain (loss)
on investments.......... 2,347,661 2,987,577 5,532,400 226,635
Change in net unrealized
appreciation
(depreciation) of
investments............. 4,535,784 2,957,170 4,106,542 4,156,231
----------- ------------ ----------- ------------
Net increase in net assets
resulting from
operations.............. 7,283,811 6,367,128 9,469,086 4,277,366
Net equalization (debits)
credits................... 0 0 0 0
Dividends and distributions
to Shareholders:
From net investment
income.................. (443,762) (217,293) 0 (11,130)
In excess of net
investment income....... 0 0 0 0
From net realized capital
gains................... (2,980,634) 0 (28,662) 0
Net increase (decrease)
from trust share
transactions............ 957,494 10,629,016 (8,755,194) 22,469,797
----------- ------------ ----------- ------------
TOTAL INCREASE
(DECREASE).............. 4,816,909 16,778,851 685,230 26,736,033
Net Assets
Beginning of year......... 38,088,350 21,309,499 47,928,954 21,192,921
----------- ------------ ----------- ------------
End of year (a)........... $42,905,259 $ 38,088,350 $48,614,184 $ 47,928,954
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
(a) Including undistributed
(distributions in excess of)
net investment income....... $ 297,494 $ 339,842 $ 0 $ 0
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
36
<PAGE>
- --------------------------------------------------------------------------------
WSIS SERIES TRUST
- -----------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
OCTOBER 31, 1996
<TABLE>
<CAPTION>
HIGH YIELD INVESTMENT GRADE SHORT-TERM
INCOME FUND INCOME FUND INVESTMENT FUND
-------------------------- -------------------------- --------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/96 10/31/95 10/31/96 10/31/95 10/31/96 10/31/95
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From operations:
Net investment income (loss)........ $ 1,570,825 $ 1,882,506 $ 1,409,904 $ 1,221,525 $ 1,483,189 $ 1,616,439
Net realized gain (loss) on
investments....................... 381,591 (1,236,881) 246,670 396,597 (1,966) (76,414)
Change in net unrealized
appreciation (depreciation) of
investments....................... (233,227) 1,163,750 (654,055) 1,226,836 3,256 104,005
----------- ------------ ----------- ------------ ----------- ------------
Net increase in net assets resulting
from operations................... 1,719,189 1,809,375 1,002,519 2,844,958 1,484,479 1,644,030
Net equalization (debits) credits..... (6,424) 7,770 (7,265) 17,649 0 0
Dividends and distributions to
Shareholders:
From net investment income.......... (1,659,875) (1,875,254) (1,404,178) (1,238,821) (1,506,838) (1,617,411)
In excess of net investment
income............................ 0 0 0 0 (30,276) 0
From net realized capital gains..... 0 0 (306,566) 0 0 0
Net increase (decrease) from trust
share transactions................ (5,087,578) 4,591,461 719,126 9,174,957 (3,356,675) 3,137,885
----------- ------------ ----------- ------------ ----------- ------------
TOTAL INCREASE (DECREASE)........... (5,034,688) 4,533,352 3,636 10,798,743 (3,409,310) 3,164,504
Net Assets
Beginning of year................... 20,488,945 15,955,593 23,703,963 12,905,220 33,935,878 30,771,374
----------- ------------ ----------- ------------ ----------- ------------
End of year (a)..................... $15,454,257 $ 20,488,945 $23,707,599 $ 23,703,963 $30,526,568 $ 33,935,878
----------- ------------ ----------- ------------ ----------- ------------
----------- ------------ ----------- ------------ ----------- ------------
(a) Including undistributed
(distributions in excess of) net
investment income..................... $ 113,006 $ (429) $ (8,068) $ (4,600) $ (53) $ 89,297
</TABLE>
See notes to financial statements.
- --------------------------------------------------------------------------------
37
<PAGE>
- --------------------------------------------------------------------------------
WSIS SERIES TRUST
- -----------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
SMALL CAPITALIZATION
EQUITY VALUE FUND VALUE FUND
----------------------------------------------- ---------------------------------------------
PERIOD ENDED PERIOD ENDED
YEAR ENDED OCTOBER 31, OCTOBER 31, YEAR ENDED OCTOBER 31, OCTOBER 31,
1996 1995 1994 (1) 1996 1995 1994 (1)
------------ ------------ -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING
OF PERIOD................... $ 11.12 $ 9.45 $ 10.00 $ 10.77 $ 9.77 $ 10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income (Loss)
(4)....................... 0.11 0.11 0.06 (0.05) (0.03) 0.00
Net Realized and Unrealized
Gain (Loss) on
Investments............... 1.92 1.63 (0.61) 2.34 1.03 (0.23)
------------ ------------ ------- ------------ ------------ ------------
TOTAL FROM INVESTMENT
OPERATIONS................ 2.03 1.74 (0.55) 2.29 1.00 (0.23)
------------ ------------ ------- ------------ ------------ ------------
LESS DISTRIBUTIONS:
From Net Investment
Income.................... (0.13) (0.07) 0.00 0.00 0.00 0.00
In Excess of Net Investment
Income.................... 0.00 0.00 0.00 0.00 0.00 0.00
From Net Realized Capital
Gains..................... (0.84) 0.00 0.00 (0.01) 0.00 0.00
Tax Return of Capital....... 0.00 0.00 0.00 0.00 0.00 0.00
------------ ------------ ------- ------------ ------------ ------------
Total Distributions......... (0.97) (0.07) 0.00 (0.01) 0.00 0.00
------------ ------------ ------- ------------ ------------ ------------
NET ASSET VALUE AT END OF
PERIOD...................... $ 12.18 $ 11.12 $ 9.45 $ 13.05 $ 10.77 $ 9.77
------------ ------------ ------- ------------ ------------ ------------
------------ ------------ ------- ------------ ------------ ------------
TOTAL RETURN.................. 19.30% 18.63% (5.50)%(5) 21.17% 10.27% (2.30)%(5)
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period
(000's)................... $42,905 $38,088 $21,309 $48,614 $47,929 $21,193
Ratio of Operating Expenses
to Average Net Assets (4)... 1.26% 1.40% 1.30%(6) 1.43% 1.56% 1.45%(6)
Ratio of Net Investment Income
to Average Net Assets....... 0.94% 1.27% 1.37%(6) (0.34)% (0.29)% 0.17%(6)
Portfolio Turnover Rate....... 56.38% 83.15% 102.56% 81.63% 45.74% 18.53%
Average Commission per Share
(7)......................... $ 0.06 - - $ 0.06 - -
</TABLE>
(1) For the period February 16, 1994 (commencement of investment operations)
through October 31, 1994.
(2) For the period February 22, 1994 (commencement of investment operations)
through October 31, 1994.
(3) For the period January 11, 1994 (commencement of investment operations)
through October 31, 1994.
(4) Net Investment Income is after reimbursement of certain expenses by Schroder
Wertheim Investment Services, Inc. (See Note 3 to the Trust's financial
statements.) Had the Investment Adviser not undertaken to pay or reimburse
expenses related to the Funds, the Net Investment Income per share and Ratio
of Operating Expenses to Average Net Assets would have been as follows:
Wertheim
Notes to Financial Highlights continued on page 39.
See notes to financial statements.
- --------------------------------------------------------------------------------
38
<PAGE>
- --------------------------------------------------------------------------------
WSIS SERIES TRUST
- -----------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
HIGH YIELD INVESTMENT GRADE
INCOME FUND INCOME FUND
----------------------------------------------- ---------------------------
PERIOD ENDED
YEAR ENDED OCTOBER 31, OCTOBER 31, YEAR ENDED OCTOBER 31,
1996 1995 1994 (1) 1996 1995
------------ ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF
PERIOD................................ $ 8.72 $ 8.79 $ 10.00 $ 9.93 $ 9.14
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (Loss) (4)...... 0.77 0.84 0.48 0.53 0.59
Net Realized and Unrealized Gain
(Loss) on Investments............... 0.07 (0.07) (1.14) (0.11) 0.79
------------ ------------ ------- ------------ ------------
TOTAL FROM INVESTMENT OPERATIONS...... 0.84 0.77 (0.66) 0.42 1.38
------------ ------------ ------- ------------ ------------
LESS DISTRIBUTIONS:
From Net Investment Income............ (0.83) (0.84) (0.47) (0.53) (0.59)
In Excess of Net Investment Income.... 0.00 0.00 (0.01) 0.00 0.00
From Net Realized Capital Gains....... 0.00 0.00 0.00 (0.12) 0.00
Tax Return of Capital................. 0.00 0.00 (0.07) 0.00 0.00
------------ ------------ ------- ------------ ------------
Total Distributions................... (0.83) (0.84) (0.55) (0.65) (0.59)
------------ ------------ ------- ------------ ------------
NET ASSET VALUE AT END OF PERIOD........ $ 8.73 $ 8.72 $ 8.79 $ 9.70 $ 9.93
------------ ------------ ------- ------------ ------------
------------ ------------ ------- ------------ ------------
TOTAL RETURN............................ 9.98% 9.16% (6.60)%(5) 4.38% 15.62%
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's)... $15,454 $20,489 $15,956 $23,708 $23,704
Ratio of Operating Expenses to Average
Net Assets (4)........................ 1.55% 1.48% 1.30%(6) 1.12% 1.06%
Ratio of Net Investment Income to
Average Net Assets.................... 8.80% 9.67% 9.67%(6) 5.46% 6.35%
Portfolio Turnover Rate................. 99.45% 149.58% 59.30% 68.76% 113.50%
Average Commission per Share (7)........ - - - - -
<CAPTION>
SHORT-TERM
INVESTMENT FUND
---------------------------------------------
PERIOD ENDED PERIOD ENDED
OCTOBER 31, YEAR ENDED OCTOBER 31, OCTOBER 31,
1994 (2) 1996 1995 1994 (3)
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF
PERIOD................................ $ 10.00 $ 9.88 $ 9.88 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (Loss) (4)...... 0.34 0.45 0.49 0.30
Net Realized and Unrealized Gain
(Loss) on Investments............... (0.83) 0.00 0.00 (0.12)
------- ------------ ------------ ------------
TOTAL FROM INVESTMENT OPERATIONS...... (0.49) 0.45 0.49 0.18
------- ------------ ------------ ------------
LESS DISTRIBUTIONS:
From Net Investment Income............ (0.34) (0.45) (0.49) (0.30)
In Excess of Net Investment Income.... 0.00 (0.01) 0.00 0.00
From Net Realized Capital Gains....... 0.00 0.00 0.00 0.00
Tax Return of Capital................. (0.03) 0.00 0.00 0.00
------- ------------ ------------ ------------
Total Distributions................... (0.37) (0.46) (0.49) (0.30)
------- ------------ ------------ ------------
NET ASSET VALUE AT END OF PERIOD........ $ 9.14 $ 9.87 $ 9.88 $ 9.88
------- ------------ ------------ ------------
------- ------------ ------------ ------------
TOTAL RETURN............................ (4.90)%(5) 4.63% 5.02% 1.83%(5)
RATIOS & SUPPLEMENTAL DATA
Net Assets at End of Period (000's)... $12,905 $30,527 $33,936 $30,771
Ratio of Operating Expenses to Average
Net Assets (4)........................ 0.87%(6) 1.00% 0.95% 0.78%(6)
Ratio of Net Investment Income to
Average Net Assets.................... 6.39%(6) 4.50% 4.91% 4.48%(6)
Portfolio Turnover Rate................. 115.63% 154.66% 27.86% 71.38%
Average Commission per Share (7)........ - - - -
</TABLE>
Equity Value Fund: 1996 - $0.11 and 1.26%, 1995 - $0.11 and 1.45%; 1994 -
$0.02 and 2.17%; Wertheim Small Capitalization Value Fund: 1996 - ($0.05) and
1.43%, 1995 - ($0.03) and 1.62%; 1994 - ($0.04) and 3.15%; Wertheim High Yield
Income Fund: 1996 - $0.74 and 1.89%, 1995 - $0.80 and 1.96%; 1994 - $0.44 and
3.59%, Wertheim Investment Grade Income Fund: 1996 - $0.52 and 1.24%, 1995 -
$0.56 and 1.50%; 1994 - $0.21 and 3.98%; and Wertheim Short-Term Investment
Fund: 1996 - $0.45 and 1.00%, 1995 - $0.47 and 1.08%; 1994 - $0.24 and 1.66%,
respectively.
(5) Not annualized.
(6) Annualized.
(7) For fiscal years beginning on or after September 1, 1995, a Fund is required
to disclose its average commission rate per share for trades on which
commissions are charged. This rate does not reflect mark-ups, mark-downs or
spreads on shares traded on a principal basis.
See notes to financial statements.
- --------------------------------------------------------------------------------
39
<PAGE>
- --------------------------------------------------------------------------------
WSIS SERIES TRUST
- -----------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996
NOTE 1 -- ORGANIZATION
WSIS Series Trust (the "Trust") is a diversified open-end series management
investment company registered under the Investment Company Act of 1940, as
amended. The Trust was organized as a business trust under the laws of The
Commonwealth of Massachusetts on May 6, 1993. The Trust has an unlimited number
of authorized shares, which are divided into five separate investment portfolios
- -- Wertheim Equity Value Fund, Wertheim Small Capitalization Value Fund,
Wertheim High Yield Income Fund, Wertheim Investment Grade Income Fund and
Wertheim Short-Term Investment Fund (collectively, the "Funds").
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
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 reporting period.
Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Funds which are in conformity with generally accepted accounting principles.
VALUATION OF INVESTMENTS: Equity securities traded on a national securities
exchange are valued at their last reported sale price on the principal exchange,
or, if traded in the over-the-counter market or on a national securities
exchange for which no sales took place on the day of valuation, at the last
available bid price. Debt securities are valued on the basis of valuations
provided by pricing services that determine valuations for normal institutional
size trading units of debt securities, or through obtaining independent quotes
from market makers. Short-term debt instruments with a remaining maturity of 60
days or less are valued at amortized cost, which approximates market value.
Securities for which current market quotations are not readily available are
valued at fair value as determined by procedures approved by the Trustees.
REPURCHASE AGREEMENTS: Funds enter into repurchase agreements with approved
institutions and are collateralized by U.S. Government securities. The Trust's
custodian takes possession of the underlying securities, the market value of
which at the time of purchase at least equals the resale price, principal amount
plus interest, of the repurchase transaction. To the extent that any repurchase
transaction exceeds one business day, the value of the underlying securities is
marked-to-market on a daily basis to ensure the adequacy of the underlying
securities. Schroder Wertheim Investment Services, Inc. ("Schroder"), investment
adviser to the Trust, is responsible for determining that the value of the
underlying securities is at all times at least equal to the resale price. In the
event of default by the seller to repurchase the securities, a Fund could
realize a loss on the sale of the underlying securities to the extent that the
proceeds of sale, including accrued
- --------------------------------------------------------------------------------
40
<PAGE>
- --------------------------------------------------------------------------------
WSIS SERIES TRUST
- -----------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
interest, is less than the resale price of the repurchase agreement. If the
seller should be involved in bankruptcy or insolvency proceedings, realization
and/or retention of the underlying securities, or proceeds may be subject to
legal proceedings.
INVESTMENT TRANSACTIONS: Investment security transactions are recorded as of
trade date. Realized gains and losses on sales of investments are determined on
the basis of identified cost.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date.
Interest income is recorded on an accrual basis.
EXPENSES: Expenses are recorded on an accrual basis. Most of the expenses of
the Trust can be directly attributed to a specific Fund. Expenses not directly
attributed to a specific Fund are allocated among the Funds in such a manner as
deemed equitable by the Trustees.
DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders from net
investment income are declared and distributed at least annually for Wertheim
Equity Value Fund and Wertheim Small Capitalization Value Fund; declared and
distributed monthly for Wertheim High Yield Income Fund and Wertheim Investment
Grade Income Fund; and declared daily and distributed monthly for Wertheim
Short-Term Investment Fund. Distributions from net realized capital gains, if
any, are declared and distributed at least annually. Distributions are recorded
on the ex-dividend date.
DEFERRED ORGANIZATION COSTS: Costs and expenses of the Trust paid by Schroder
and its affiliates in connection with the organization of the Trust and the
initial public offering of its shares have been deferred by the Trust and are
being amortized on a straight-line basis from the date operations commenced over
a period that it is expected a benefit will be realized, not to exceed five
years.
Schroder has agreed with respect to each of the Funds that, if any of the
initial shares of a Fund are redeemed during such amortization period by any
holder thereof, the redemption proceeds will be reduced for any unamortized
organization expenses in the same ratio as the number of shares redeemed bears
to the number of initial shares held at the time of redemption.
EQUALIZATION: Wertheim High Yield Income Fund and Wertheim Investment Grade
Income Fund follow an accounting practice known as equalization by which a
portion of the proceeds from sales and costs of redemptions of Fund shares
equivalent, on a per share basis, to the amount of undistributed net investment
income on the date of the transaction is credited or charged to undistributed
net investment income. As a result, undistributed net investment income per
share is unaffected by sales and redemptions of the above listed Funds' shares.
FEDERAL INCOME TAXES: Each Fund intends to qualify as a "regulated investment
company" by complying with the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended. By so qualifying, the Funds will not be
subject to federal income taxes to the extent that, among other things, they
distribute substantially all of their
- --------------------------------------------------------------------------------
41
<PAGE>
- --------------------------------------------------------------------------------
WSIS SERIES TRUST
- -----------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
taxable income, including realized capital gains, for the fiscal year. In
addition, by distributing during each calendar year substantially all of their
net investment income, capital gains and certain other amounts, if any, the
Funds will not be subject to a federal excise tax.
As of October 31, 1996, realized capital loss carryforwards, for Federal income
tax purposes, available to be used to offset future realized capital gains are
as follows: Wertheim High Yield Income Fund has $1,328,390; and Wertheim Short-
Term Investment Fund has $104,408. The carryforwards expire on October 31, 2004.
Income 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 market discount,
losses deferred due to wash sales and excise tax regulations.
At October 31, 1996, the Trust reclassified the following amounts between paid
in capital, accumulated undistributed net realized gain (loss) and undistributed
net investment income:
<TABLE>
<CAPTION>
INCREASE/(DECREASE)
INCREASE/(DECREASE) ACCUMULATED
INCREASE/(DECREASE) UNDISTRIBUTED NET REALIZED
PAID-IN CAPITAL INVESTMENT INCOME GAIN/(LOSS)
----------------- ----------------- ------------------
<S> <C> <C> <C>
Wertheim Equity Value Fund......... $ (1,048) $ 1,048 $ 0
Wertheim Small Capitalization Value
Fund.............................. (3,936) 169,856 (165,920)
Wertheim High Yield Income Fund.... (79,839) 208,909 (129,070)
Wertheim Investment Grade Income
Fund.............................. (4,963) (1,929) 6,892
Wertheim Short-Term Investment
Fund.............................. 11,131 (35,425) 24,294
</TABLE>
These reclassifications had no impact on the net asset value of the Funds and
are designated to present each Fund's capital accounts on a tax basis.
NOTE 3 -- INVESTMENT ADVISORY FEES AND ADMINISTRATION AGREEMENT
The Trust has entered into an investment advisory agreement with Schroder. Under
the agreement, Schroder provides investment management services, and receives
for its services compensation monthly at the following annual rates based on the
average daily net assets of each Fund taken separately: 0.75% for Wertheim
Equity Value Fund; 0.95% for Wertheim Small Capitalization Value Fund; 0.90% for
Wertheim High Yield Income Fund; 0.50% for Wertheim Investment Grade Income
Fund; and 0.40% for Wertheim Short-Term Investment Fund.
The Trust has also entered into an Administration Agreement with State Street
Bank and Trust Company ("State Street"). Under the Administration Agreement, the
Trust pays compensation to State Street at the following annual rates based on
- --------------------------------------------------------------------------------
42
<PAGE>
- --------------------------------------------------------------------------------
WSIS SERIES TRUST
- -----------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
the average daily net assets of each Fund taken separately: 0.08% of the first
$125 million of each Fund's average daily net assets, 0.06% of the next $125
million of each Fund's average daily net assets and 0.04% of each Fund's average
daily net assets in excess of $250 million, subject to certain minimum
requirements.
Schroder has voluntarily agreed to reduce its compensation and, if necessary, to
pay certain expenses of each of the Funds until October 31, 1997, to the extent
that a Fund's expenses (other than Schroder's compensation, brokerage, interest,
taxes, deferred organizational expenses, and extraordinary expenses) exceed the
following annual rates: 0.80% of average daily net assets of Wertheim Equity
Value Fund; 0.75% of average daily net assets of Wertheim Small Capitalization
Value Fund; 0.65% of average daily net assets of Wertheim High Yield Income
Fund; 0.62% of average daily net assets of Wertheim Investment Grade Income
Fund; and 0.63% of average daily net assets of Wertheim Short-Term Investment
Fund. The Trust pays all expenses not assumed by Schroder, including Trustees'
fees, auditing, legal, custodial, and investor servicing and shareholder
reporting expenses.
NOTE 4 -- TRANSACTIONS WITH AFFILIATES
BROKERAGE COMMISSIONS: Brokerage commissions received by affiliates of
Schroder, from portfolio transactions conducted with the Funds during the year
ended October 31, 1996, amounted to $720.
TRUSTEES' FEES: The Trust pays no compensation to Trustees who are employees of
Schroder. Trustees who are not Schroder employees receive an annual fee of
$5,000 and an additional fee of $1,500 for each Trustees' meeting attended.
NOTE 5 -- INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investments, excluding
short-term securities for each Fund, for the year ended October 31, 1996 were as
follows:
<TABLE>
<CAPTION>
NON- NON-
GOVERNMENT GOVERNMENT GOVERNMENT GOVERNMENT
PURCHASES PURCHASES SALES SALES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Wertheim Equity Value Fund........................ $22,952,688 $ 0 $23,221,473 $ 0
Wertheim Small Capitalization Value Fund.......... 38,325,826 0 46,497,662 0
Wertheim High Yield Income Fund................... 16,592,832 0 20,917,841 0
Wertheim Investment Grade Income Fund............. 3,427,181 13,801,885 6,572,202 9,689,915
Wertheim Short-Term Investment Fund............... 4,534,394 6,384,925 3,000,000 3,167,814
</TABLE>
- --------------------------------------------------------------------------------
43
<PAGE>
- --------------------------------------------------------------------------------
WSIS SERIES TRUST
- -----------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
The identified cost for federal income tax purposes of investments owned by each
Fund and their respective gross unrealized appreciation and depreciation at
October 31, 1996 were as follows:
<TABLE>
<CAPTION>
NET
IDENTIFIED GROSS UNREALIZED UNREALIZED
COST APPRECIATION (DEPRECIATION) APPRECIATION
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Wertheim Equity Value Fund.............. $36,756,697 $ 8,221,775 $(1,030,337 ) $7,191,438
Wertheim Small Capitalization Value
Fund................................... 41,260,631 10,052,434 (1,082,834 ) 8,969,600
Wertheim High Yield Income Fund......... 14,991,465 394,317 (134,397 ) 259,920
Wertheim Investment Grade Income Fund... 23,062,086 500,186 (165,392 ) 334,794
Wertheim Short-Term Investment Fund..... 30,511,427 22,940 (5,441 ) 17,499
</TABLE>
NOTE 6 -- SHAREHOLDERS' TRANSACTIONS
Following is a summary of shareholder transactions for each Fund:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
SHARES DOLLARS SHARES DOLLARS
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
WERTHEIM EQUITY VALUE FUND
Shares sold..................................... 810,872 $ 9,343,159 2,234,169 $ 21,323,054
Shares issued to shareholders in reinvestment... 314,407 3,383,017 23,861 216,153
Shares redeemed................................. (1,027,306) (11,768,682) (1,087,443) (10,910,191)
------------ ------------- ------------ -------------
Net increase.................................... 97,973 $ 957,494 1,170,587 $ 10,629,016
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
WERTHEIM SMALL CAPITALIZATION VALUE FUND
Shares sold..................................... 992,874 $ 12,163,446 3,098,020 $ 30,759,624
Shares issued to shareholders in reinvestment... 2,425 28,367 1,129 10,971
Shares redeemed................................. (1,719,678) (20,947,007) (820,811) (8,300,798)
------------ ------------- ------------ -------------
Net increase (decrease)......................... (724,379) $ (8,755,194) 2,278,338 $ 22,469,797
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
WERTHEIM HIGH YIELD INCOME FUND
Shares sold..................................... 371,174 $ 3,273,455 1,003,992 $ 8,719,371
Shares issued to shareholders in reinvestment... 182,836 1,596,001 201,685 1,754,861
Shares redeemed................................. (1,134,160) (9,963,458) (671,847) (5,875,001)
Income equalization (received) paid............. 0 6,424 0 (7,770)
------------ ------------- ------------ -------------
Net increase (decrease)......................... (580,150) $ (5,087,578) 533,830 $ 4,591,461
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</TABLE>
- --------------------------------------------------------------------------------
44
<PAGE>
- --------------------------------------------------------------------------------
WSIS SERIES TRUST
- -----------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
SHARES DOLLARS SHARES DOLLARS
------------ ------------- ------------ -------------
WERTHEIM INVESTMENT GRADE INCOME FUND
<S> <C> <C> <C> <C>
Shares sold..................................... 790,360 $ 7,818,847 1,636,204 $ 15,312,312
Shares issued to shareholders in reinvestment... 169,595 1,652,197 124,830 1,193,295
Shares redeemed................................. (904,441) (8,759,183) (785,028) (7,313,001)
Income equalization (received) paid............. 0 7,265 0 (17,649)
------------ ------------- ------------ -------------
Net increase.................................... 55,514 $ 719,126 976,006 $ 9,174,957
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
WERTHEIM SHORT-TERM INVESTMENT FUND
Shares sold..................................... 946,514 $ 9,335,247 2,016,637 $ 19,914,676
Shares issued to shareholders in reinvestment... 154,582 1,524,331 162,019 1,599,931
Shares redeemed................................. (1,440,993) (14,216,253) (1,860,847) (18,376,722)
------------ ------------- ------------ -------------
Net increase (decrease)......................... (339,897) $ (3,356,675) 317,809 $ 3,137,885
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</TABLE>
NOTE 7 -- BENEFICIAL INTEREST
The following schedule shows the number of shareholders each owning 5% or more
of a Fund and the total percentage of the Fund held by such shareholders.
<TABLE>
<CAPTION>
5% OR GREATER SHAREHOLDERS
NUMBER % OF FUND HELD
--------------- -----------------
<S> <C> <C>
Wertheim Equity Value Fund........................................ 2 27.42%
Wertheim Small Capitalization Value Fund.......................... 3 28.80%
Wertheim High Yield Income Fund................................... 4 45.70%
Wertheim Investment Grade Income Fund............................. 2 14.64%
</TABLE>
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45
<PAGE>
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WSIS SERIES TRUST
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1996
NOTE 8 -- SHAREHOLDER MEETING
A meeting of Shareholders of WSIS Series Trust was held on Tuesday, June 25,
1996 at the offices of Schroder Wertheim Investment Services, Inc., 787 Seventh
Avenue, New York, New York. The matter voted upon by Shareholders and the
resulting votes are presented below:
1. Election of Trustees
<TABLE>
<CAPTION>
Number of Votes
Trustee For Withheld
- ------------------------------------------------------------------ ------------- ---------
<S> <C> <C>
Peter S. Knight................................................... 11,652,204.198 43,480.472
David N. Dinkins.................................................. 11,666,191.741 29,492.929
Madelon DeVoe Talley.............................................. 11,695,684.670 0.000
John I. Howell.................................................... 11,695,684.670 0.000
Laura E. Luckyn-Malone............................................ 11,695,684.670 0.000
</TABLE>
Mr. E. William Smethurst, Jr. resigned as Trustee of the Trust on June 21, 1996
and, although previously nominated, did not stand for election at the meeting of
shareholders. Ms. Luckyn-Malone, President of the Trust, replaced Mr. Smethurst
as nominee for election to the office of Trustee.
NOTE 9 -- TAX INFORMATION NOTICE
For Federal income tax purposes, the following information is furnished with
respect to the distributions of the Trust for its fiscal year ended October 31,
1996:
Wertheim Equity Value Fund and Wertheim Small Capitalization Value Fund have
99.86% and 99.67%, respectively, of 1996 dividends distributed during the fiscal
year qualify for corporate dividends received deduction.
Wertheim Equity Value Fund, Wertheim Small Capitalization Value Fund and
Wertheim Investment Grade Income Fund designates $641,790, $28,662 and $51,397,
respectively, as capital gains dividends for the purpose of the dividend paid
deduction.
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46
<PAGE>
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WSIS SERIES TRUST
- -----------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and
Trustees of WSIS Series Trust:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of WSIS Series Trust (a Massachusetts business
trust comprising, respectively, the Wertheim Equity Value Fund, Wertheim Small
Capitalization Value Fund, Wertheim High Yield Income Fund, Wertheim Investment
Grade Income Fund and Wertheim Short-Term Investment Fund) as of October 31,
1996, 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 two years in the period then
ended, and for the period ended October 31, 1994. These financial statements and
financial highlights are the responsibility of the Trust's 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 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 securities owned as of
October 31, 1996 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 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 each
of the respective funds constituting the WSIS Series Trust as of October 31,
1996, 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
financial highlights for each of the two years in the period then ended, and for
the period ended October 31, 1994 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
December 12, 1996
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47
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<PAGE>
INVESTMENT MANAGER
Schroder Wertheim Investment Services, Inc.
OFFICERS
Laura E. Luckyn-Malone, President
David Gibson, Vice President
Jane P. Lucas, Vice President
Catherine A. Mazza, Vice President and Clerk
Mark J. Smith, Vice President
Robert Jackowitz, Treasurer
Barbara Gottlieb, Assistant Clerk
TRUSTEES
Madelon DeVoe Talley
David N. Dinkins
John I. Howell
Peter S. Knight
Laura E. Luckyn-Malone
TRANSFER AND SHAREHOLDER SERVICING AGENT
Boston Financial Data Services, Inc.
CUSTODIAN
State Street Bank and Trust Company
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
The information contained in this report is intended for the general
information of the shareholders of the Trust. This report is not authorized
for distribution to prospective investors unless preceded or accompanied by a
current Trust prospectus which contains important information concerning the
Trust.
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