(Leuthold Core Investment Fund Logo)
Semi-Annual Report
March 31, 1998
(Leuthold Core Investment Fund Logo)
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998
(UNAUDITED)
ASSETS:
Investments, at value
(cost $33,323,610) $37,708,422
Cash 27,368
Interest receivable 306,709
Dividends receivable 13,079
Organizational expenses, net of
accumulated amortization 22,678
Other assets 16,328
-----------
Total Assets 38,094,584
-----------
LIABILITIES:
Payable to Adviser 15,951
Accrued expenses and
other liabilities 39,953
-----------
Total Liabilities 55,904
-----------
NET ASSETS $38,038,680
-----------
-----------
NET ASSETS CONSIST OF:
Capital stock $32,444,200
Accumulated undistributed
net investment income 6,182
Accumulated undistributed
net realized gains on
investments 1,203,486
Net unrealized appreciation
on investments 4,384,812
-----------
Total Net Assets $38,038,680
-----------
-----------
Shares outstanding
(250,000,000 shares of
$.0001 par value authorized) 3,243,109
Net Asset Value, Redemption
Price and Offering Price
Per Share $ 11.73
-----------
-----------
STATEMENT OF OPERATIONS
OCTOBER 1, 1997 THROUGH MARCH 31, 1998
(UNAUDITED)
INVESTMENT INCOME:
Dividend income $ 115,150
Interest income 699,644
-----------
Total investment income 814,794
-----------
EXPENSES:
Investment advisory fee 149,905
Administration fee 14,508
Shareholder servicing and
accounting costs 22,133
Custody fees 5,878
Federal and state registration 16,850
Professional fees 22,717
Amortization of
organizational expenses 4,290
Reports to shareholders 8,981
Directors' fees and expenses 2,512
Other 2,656
-----------
Total expenses before
reimbursement 250,430
Less: Reimbursement
from Adviser (42,229)
-----------
Net expenses 208,201
-----------
NET INVESTMENT INCOME 606,593
-----------
REALIZED AND UNREALIZED GAINS
ON INVESTMENTS:
Net realized gains on investments 1,422,171
Change in unrealized
appreciation on investments 1,248,819
-----------
Net realized and unrealized
gains on investments 2,670,990
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $3,277,583
-----------
-----------
See notes to the financial statements.
STATEMENT OF CHANGES IN NET ASSETS
OCTOBER 1, 1997 YEAR
THROUGH ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997
--------------- ------------------
(UNAUDITED)
OPERATIONS:
Net investment income $ 606,593 $ 1,279,782
Net realized gains on investments 1,422,171 650,665
Change in unrealized appreciation
on investments 1,248,819 2,908,909
----------- -----------
Net increase in net assets from operations 3,277,583 4,839,356
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (603,414) (1,318,685)
In excess of net investment income -- (125,721)
From net realized gains (1,015,457) (794,514)
----------- -----------
Total distributions (1,618,871) (2,238,920)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 5,746,475 5,469,769
Proceeds from shares issued to holders in
reinvestment of dividends 1,547,007 2,168,493
Cost of shares redeemed (1,473,695) (11,419,018)
----------- -----------
Net increase (decrease) in net assets
from capital share transactions 5,819,787 (3,780,756)
----------- -----------
TOTAL INCREASE (DECREASE)
IN NET ASSETS 7,478,499 (1,180,320)
NET ASSETS:
Beginning of period 30,560,181 31,740,501
----------- -----------
End of period (including undistributed
net investment income of $6,182
and $0, respectively) $38,038,680 $30,560,181
----------- -----------
----------- -----------
See notes to the financial statements.
FINANCIAL HIGHLIGHTS
<TABLE>
OCTOBER 1, 1997 YEAR NOVEMBER 20, 1995(1)<F1>
THROUGH ENDED THROUGH
MARCH 31, 1998 SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
--------------- ------------------- -------------------
(UNAUDITED)
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $11.17 $10.18 $10.00
-------- -------- --------
Income from investment operations:
Net investment income 0.20 0.44(2)<F2> 0.38
Net realized and unrealized
gains on investments 0.92 1.32 0.16
-------- -------- --------
Total from investment operations 1.12 1.76 0.54
-------- -------- --------
Less distributions:
From net investment income (0.20) (0.46) (0.36)
In excess of net investment income -- (0.05) --
From net realized gains (0.36) (0.26) --
-------- -------- --------
Total distributions (0.56) (0.77) (0.36)
-------- -------- --------
Net asset value, end of period $11.73 $11.17 $10.18
-------- -------- --------
-------- -------- --------
Total return 10.23%(3)<F3> 17.96% 5.43%(3)<F3>
Supplemental data and ratios:
Net assets, end of period $38,038,680 $30,560,181 $31,740,501
Ratio of expenses to average net assets:
Before expense reimbursement 1.50%(4)<F4> 1.47% 1.55%(4)<F4>
After expense reimbursement 1.25%(4)<F4> 1.25% 1.25%(4)<F4>
Ratio of net investment income to
average net assets:
Before expense reimbursement 3.38%(4)<F4> 4.05% 4.14%(4)<F4>
After expense reimbursement 3.63%(4)<F4> 4.27% 4.44%(4)<F4>
Portfolio turnover rate 21.61% 35.62% 103.30%
Average commission rate paid $0.0608 $0.0600 $0.0600
(1)<F1> Commencement of operations.
(2)<F2> Net investment income per share is calculated using ending balances prior
to consideration of adjustments for permanent book and tax differences.
(3)<F3> Not annualized.
(4)<F4> Annualized.
</TABLE>
See notes to the financial statements.
SCHEDULE OF INVESTMENTS
MARCH 31, 1998
(UNAUDITED)
NUMBER MARKET
OF SHARES VALUE
-------- -------
COMMON STOCKS - 26.1%
AIRLINES - MAJOR - 2.3%
1,400 AMR Corporation *<F5> $ 200,462
1,600 Alaska Air Group, Inc. *<F5> 86,700
3,900 Continental Airlines, Inc. *<F5> 229,369
1,700 Delta Air Lines, Inc. 201,025
1,800 UAL Corporation *<F5> 167,288
---------
884,844
---------
CABLE - 2.9%
13,300 Adelphia Communications Corporation *<F5> 394,012
5,400 Cablevision Systems Corporation Class A *<F5> 355,050
5,200 Comcast Corporation Class A 183,625
2,600 TCA Cable TV, Inc. 153,725
---------
1,086,412
---------
HEALTH CARE - COST CONTAINMENT - 1.6%
2,400 Bindley Western Industries, Inc. 91,050
5,200 Mariner Health Group, Inc. *<F5> 89,050
7,200 Mylan Laboratories, Inc. 165,600
3,000 National Surgery Centers, Inc. *<F5> 76,687
2,500 Shared Medical Systems Corporation 195,937
---------
618,324
---------
HOUSING - 1.7%
3,100 Centex Corporation 118,188
4,400 Kaufman and Broad Home Corporation 143,275
4,100 Lennar Corporation 141,194
1,000 Ryland Group, Inc. 27,625
5,000 Standard Pacific Corporation 75,938
4,700 Toll Brothers, Inc. *<F5> 132,188
---------
638,408
---------
INSURANCE - LIFE - 1.9%
2,900 Equitable Companies, Inc. 163,669
5,100 Presidential Life Corporation 96,581
5,600 Provident Companies, Inc. 192,150
5,500 SunAmerica, Inc. 263,312
---------
715,712
---------
INSURANCE - PROPERTY & CASUALTY - 1.6%
3,900 20th Century Industries 104,813
2,600 Berkley (W.R.) Corporation 123,175
1,800 HSB Group, Inc. 121,050
2,400 Ohio Casualty Corporation 115,200
2,400 Orion Capital Corporation 131,250
---------
595,488
---------
REAL ESTATE INVESTMENT TRUSTS - 9.5%
4,700 Apartment Investment & Management Company
Class A 180,950
5,100 CBL & Associates Properties, Inc. 124,950
8,900 Crescent Real Estate Equities Company 320,400
4,600 Developers Diversified Realty Corporation 188,025
3,700 Equity Residential Properties Trust 185,925
9,000 Franchise Finance Corporation of America 250,312
7,400 Mack-Cali Realty Corporation 289,062
3,900 Merry Land & Investment Company, Inc. 87,262
8,800 Nationwide Health Properties, Inc. 220,000
4,000 Oasis Residential, Inc. 88,750
10,099 Patriot American Hospitality, Inc. 272,673
5,800 Prentiss Properties Trust 151,525
5,700 RFS Hotel Investors, Inc. 104,025
10,800 Reckson Associates Realty Corporation 284,850
10,300 Saul Centers, Inc. 186,044
6,300 Sovran Self Storage, Inc. 187,031
8,100 Sun Communities, Inc. 281,475
15,900 United Dominion Realty Trust, Inc. 230,550
---------
3,633,809
---------
TECHNOLOGY - WIRELESS SERVICES - 2.1%
3,400 Airtouch Communications, Inc. *<F5> 166,387
3,000 Centennial Cellular Corporation Class A *<F5> 78,844
2,800 Mobile Telecommunication Technologies
Corporation *<F5> 62,650
2,700 Omnipoint Corporation *<F5> 79,650
2,200 QUALCOMM, Inc. *<F5> 117,700
1,600 Vodafone Group plc ADR<F6> 166,200
6,200 Western Wireless Corporation Class A *<F5> 142,600
---------
814,031
---------
UTILITIES - ELECTRIC - 2.5%
4,000 Central Louisiana Electric 137,000
3,500 Idaho Power Company 131,906
3,000 Minnesota Power & Light Company 127,500
4,300 Montana Power Company 155,069
2,100 Northern States Power Company 123,900
2,400 OGE Energy Corporation 138,900
5,500 Washington Water Power Company 134,750
---------
949,025
---------
Total common stocks
(cost $7,669,896) 9,936,053
---------
INVESTMENT COMPANIES - 3.1%
EMERGING COUNTRY FUNDS - 3.1%
23,800 Asia Pacific Fund 214,200
23,600 Asia Tigers Fund 200,600
17,600 China Fund 199,100
24,400 Korea Fund 198,250
32,600 WEBS - Malaysia 205,788
25,300 WEBS - Singapore 177,100
---------
Total investment companies
(cost $1,047,400) 1,195,038
---------
CONTRACTS (100 SHARES PER CONTRACT)
- ----------------------------------
CALL OPTIONS PURCHASED - 1.8%
S&P 500:
113 Expiration September 1998, Exercise Price $1,125 683,650
---------
Total call options purchased
(cost $452,678) 683,650
---------
Principal
Amount
- -------
FIXED INCOME SECURITIES - 51.8%
U.S. TREASURY OBLIGATIONS - 51.8%
$12,675,000 U.S. Treasury Strips, due 2/15/2018 #<F7> 3,839,510
-----------
U.S. Treasury Bonds:
8,215,000 7.50%, due 11/15/2016 9,578,180
2,245,000 8.125%, due 8/15/2019 2,806,952
-----------
12,385,132
-----------
U.S. Treasury Note,
3,360,000 6.25%, due 2/15/2007 3,474,451
-----------
Total fixed income securities
(cost $17,959,048) 19,699,093
-----------
SHORT-TERM INVESTMENTS - 16.3%
VARIABLE RATE DEMAND NOTES - 16.3%
$1,620,283 General Mills 1,620,283
1,186,096 Sara Lee 1,186,096
1,700,236 Pitney Bowes 1,700,236
1,687,973 Johnson Controls 1,687,973
-----------
Total short-term investments
(cost $6,194,588) 6,194,588
-----------
Total investments - 99.1%
(cost $33,323,610) 37,708,422
Other assets in excess
of liabilities - 0.9% 330,258
-----------
TOTAL NET ASSETS - 100.0% $38,038,680
-----------
-----------
*<F5> Non-income producing security.
ADR<F6> American Depository Receipts.
#<F7> Principal only.
See notes to the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Leuthold Funds, Inc. (the "Company") was incorporated on August 30, 1995, as
a Maryland Corporation and is registered as an open-end management investment
company under the Investment Company Act of 1940. The Company currently consists
of one series, Leuthold Core Investment Fund, formerly known as Leuthold Asset
Allocation Fund, (the "Fund"). The investment objective of the Fund is to seek
total return consistent with prudent investment risk over the long term. The
Fund commenced operations on November 20, 1995.
The costs incurred in connection with the organization, initial registration
and public offering of shares, aggregating $43,019, have been paid by the Fund.
These costs are being amortized over the period of benefit, but not to exceed
sixty months from the Fund's commencement of operations.
The following is a summary of significant accounting policies consistently
followed by the Fund.
a) Investment Valuation - Common stocks that are listed on a securities
exchange are valued at the last quoted sales price on the day the valuation is
made. Price information on listed stocks is taken from the exchange where the
security is primarily traded. Options and securities which are listed on an
exchange but which are not traded on the valuation date are valued at the most
recent bid prices. Unlisted securities for which market quotations are readily
available are valued at the latest quoted bid price. Debt securities are valued
at the latest bid prices furnished by independent pricing services. Other assets
and securities for which no quotations are readily available are valued at fair
value as determined in good faith by the Directors. Short-term instruments
(those with remaining maturities of 60 days or less) are valued at amortized
cost, which approximates market.
b) Federal Income Taxes - It is the Fund's policy to meet the requirements of
the Internal Revenue Code applicable to regulated investment companies and the
Fund intends to distribute investment company net taxable income and net capital
gains to shareholders. Therefore, no federal income tax provision is required.
c) Distributions to Shareholders - Dividends from net investment income are
declared and paid quarterly. Distributions of net realized capital gains, if
any, will be declared at least annually.
d) Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
e) Purchased Option Accounting - Option contracts purchased are included in
the Statement of Assets and Liabilities as an asset and are valued at the last
bid price reported on the date of valuation. When option contracts expire or are
closed, realized gains or losses are recognized without regard to any unrealized
gains or losses on the underlying securities. Option contracts are held by the
Fund for trading and hedging purposes.
f) Other - Investment and shareholder transactions are recorded on the trade
date. The Fund determines the gain or loss realized from the investment
transactions by comparing the original costs of the security lot sold with the
net sales proceeds. Dividend income is recognized on the ex-dividend date or as
soon as information is available to the Fund, and interest income is recognized
on an accrual basis. Discounts and premiums on bonds are amortized over the life
of the respective bond. Generally accepted accounting principles require that
permanent financial reporting and tax differences be reclassified to capital
stock.
2. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund were as follows:
YEAR
OCT. 1, 1997 - ENDED
MAR. 31, 1998 SEPT. 30, 1997
------------- --------------
Shares sold 499,632 522,072
Shares issued to
holders in
reinvestment
of dividends 135,854 208,024
Shares redeemed (128,402) (1,112,267)
---------- -----------
Net increase (decrease) 507,084 (382,171)
---------- -----------
---------- -----------
3. INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term investments, for the
six months ended March 31, 1998 were as follows:
Purchases Sales
------------------- --------------------
U.S. U.S.
Government Other Government Other
---------- ----- ---------- -----
$5,193,726 $6,425,652 $1,669,086 $4,201,027
At March 31, 1998, gross unrealized appreciation and depreciation of
investments for tax purposes were as follows:
Appreciation $4,468,115
(Depreciation) (432,201)
----------
Net appreciation on investments $4,035,914
----------
----------
At March 31, 1998, the cost of investments for federal income tax purposes was
$33,672,508.
At the close of business on January 19, 1996, the unit holders of the Piper
Trust Common Leuthold Flexible Fund transferred their assets to the Fund. As a
result of the tax-free transfer, the Fund acquired $860,971 of unrealized
appreciation for tax purposes. Since inception, the Fund has realized $845,182
of the appreciation.
4. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Fund has entered into an Investment Advisory Agreement with Leuthold &
Anderson, Inc. Pursuant to its advisory agreement with the Fund, the Investment
Adviser is entitled to receive a fee, calculated daily and payable monthly, at
the annual rate of 0.90% as applied to the Fund's daily net assets.
The Investment Adviser has voluntarily agreed to reimburse the Fund to the
extent necessary to ensure that total operating expenses (exclusive of interest,
taxes, brokerage commissions and other costs incurred in connection with the
purchase or sale of portfolio securities, and extraordinary items) do not exceed
the annual rate of 1.25% of the net assets of the Fund, computed on a daily
basis.
Firstar Trust Company, a subsidiary of Firstar Corporation, a publicly held
bank holding company, serves as custodian, transfer agent, administrator and
accounting services agent for the Fund.
For the period ended March 31, 1998, the Fund paid Weeden & Co., L.P., an
affiliate of the Adviser $13,749 of brokerage commissions.
(Leuthold Core Investment Fund Logo)
INVESTMENT ADVISER:
Leuthold & Anderson, Inc., Minnesota
ADMINISTRATOR, TRANSFER AGENT,
DIVIDEND PAYING AGENT, SHAREHOLDER
SERVICING AGENT & CUSTODIAN:
Firstar Trust Company, Wisconsin
COUNSEL:
Foley & Lardner, Wisconsin
AUDITORS:
Arthur Andersen LLP, Wisconsin
This report is authorized for distribution only when preceded or accompanied by
a current prospectus.
