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SEMI-ANNUAL REPORT
==================================================================
THE KENWOOD FUNDS
==================================================================
The Kenwood Growth & Income Fund
OCTOBER 31, 1999
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TABLE OF CONTENTS
PAGE
----
Shareholder Letter ............................................1
Performance Summary ...........................................2
Statement of Assets and Liabilities............................3
Statement of Operations .......................................4
Statements of Changes in Net Assets............................5
Financial Highlights ..........................................6
Schedule of Investments .....................................7-8
Notes to the Financial Statements ..........................9-10
NOTICE TO INVESTORS
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, nor are they insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other agency.
An investment in the Fund involves risk, including possible loss of
principal, due to fluctuation in the Fund's net asset value.
Distributor: AmeriPrime Financial Securities, Inc.
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December 2, 1999
Dear Fellow Shareholders:
The twelve months ending October 31, 1999 have been a period of value
fluctuations precipitated by speculation surrounding rate actions by the Federal
Reserve Open Market Committee (FOMC). After a series of rate reductions in late
1998, stock prices generally experienced a substantial recovery by the end of
the year. The market, which then began to broaden early in 1999, narrowed again
in mid summer, with large cap and technology stocks returning to prominence.
Performance during the period was led by growth stocks, which outperformed value
in all market capitalizations, large, midcap and smallcap. Investment styles,
such as growth and value, eeb and flow in strength of performance. The Kenwood
Growth & Income Fund's one year return was 6.49%. The cumulative total return
for the Fund since inception (May 1, 1996) was 37.86%.* Total assets under
management were $3,194,000 at October 31, 1999.
Our investment strategy focuses on rigorous fundamental analysis of each
company's management direction and financial strength. In addition, we have a
value oriented, contrarian approach to investing that is designed to outperform
the S&P Midcap 400 and the Russell Midcap indexes over the long term, while
reducing volatility and risk. We advise all investors to resist the urge to time
the market by jumping into and out of it, but to focus on longer term growth.
Buying additional shares during weak periods provides benefits when stocks
resume their upward climb.
The Individual Retirement Account (IRA) continues to be valuable as part of a
long-term investment strategy for many mutual fund investors. The IRA is one of
the few tax deferred investment instruments that remain. You can make
contributions to a 1999 Traditional or Roth IRA until April 17, 2000. Please
consult your accountant or financial planner to determine if an IRA is a
suitable investment for you.
We are pleased to serve as your Fund Manager and appreciate your continued vote
of confidence. As we approach the new millennium we wish you the best and look
forward to assisting you in meeting your personal financial goals.
Sincerely,
/s/ Barbara L. Bowles
Barbara L Bowles, CFA
President
Total Returns
Kenwood Growth & Income Fund S&P MidCap 400 Index
Apr-96 10,000 10,000
May-96 10,330 10,135
Jun-96 10,390 9,983
Jul-96 9,600 9,307
Aug-96 9,850 9,844
Sep-96 10,400 10,273
Oct-96 10,290 10,303
Nov-96 10,890 10,883
Dec-96 10,815 10,895
Jan-97 11,220 11,304
Feb-97 11,372 11,211
Mar-97 11,302 10,733
Apr-97 11,352 11,013
May-97 12,335 11,974
Jun-97 12,660 12,310
Jul-97 13,237 13,529
Aug-97 13,308 13,513
Sep-97 13,866 14,290
Oct-97 13,450 13,668
Nov-97 13,613 13,870
Dec-97 14,086 14,409
Jan-98 13,391 14,135
Feb-98 14,672 15,305
Mar-98 15,259 15,996
Apr-98 15,400 16,288
May-98 15,052 15,555
Jun-98 15,357 15,653
Jul-98 14,423 15,046
Aug-98 11,990 12,246
Sep-98 11,990 13,388
Oct-98 12,946 14,585
Nov-98 13,738 15,313
Dec-98 13,856 17,163
Jan-99 13,379 16,495
Feb-99 12,948 15,631
Mar-99 13,111 16,067
Apr-99 14,717 17,335
May-99 15,263 17,409
Jun-99 15,624 18,341
Jul-99 15,484 17,952
Aug-99 14,821 17,336
Sep-99 14,019 16,800
Oct-99 13,786 17,657
<TABLE>
<CAPTION>
AVERAGE ANNUAL AVERAGE ANNUAL CUMULATIVE
SIX MONTHS ENDED 1 YEAR ENDED 3 YEARS ENDED SINCE INCEPTION SINCE INCEPTION
TOTAL RETURN OCTOBER 31, 1999 OCTOBER 31, 1999 OCTOBER 31, 1999 MAY 1, 1996 MAY 1, 1996
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
The Kenwood Growth &
Income Fund -6.32% 6.49% 10.24% 9.60% 37.86%
S&P MidCap 400 Stock
Index* 1.86% 21.07% 19.67% 17.62% 76.60%
====================================================================================================================================
</TABLE>
*The Standard & Poor's MidCap 400 Index (S&P MidCap) is a
capital-weighted index, representing the aggregate market value of
the common equity of 400 stocks chosen by Standard & Poor's with a
weighted average market value of $3.9 billion as of October 31,
1999. This chart assumes an initial investment of $10,000 made on
May 1, 1996 (commencement of operations). Returns shown include the
reinvestment of all dividends. Past performance is not predictive of
future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or
less than the original cost.
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THE KENWOOD GROWTH & INCOME FUND
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
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ASSETS:
Investments, at value
(Cost of $3,473,677) $3,220,312
Income receivable 5,098
Receivable for capital shares sold 200
Receivable for securities sold 23,504
Prepaid expenses 9,512
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Total assets 3,258,626
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LIABILITIES:
Payable to Adviser 7,384
Accrued expenses and other liabilities 26,791
Payable for securities purchased 31,063
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Total liabilities 65,238
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NET ASSETS $3,193,388
================
NET ASSETS CONSIST OF:
Capital stock $3,234,122
Undistributed net investment income 34,641
Accumulated net realized gain on investments 177,990
Net unrealized depreciation of investments (253,365)
================
Total Net Assets $3,193,388
================
Shares outstanding
(unlimited amount of shares authorized) 269,538
Net Asset Value and Redemption Price Per Share $11.85
================
SEE NOTES TO THE FINANCIAL STATEMENTS
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================================================================================
THE KENWOOD GROWTH & INCOME FUND
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STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED OCTOBER 31, 1999
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INVESTMENT INCOME:
Dividend income (net of foreign taxes
withheld of $38) $31,918
Interest income 6,849
--------------
Total investment income 38,767
--------------
EXPENSES:
Shareholder servicing fees 13,912
Investment advisory fees 13,142
Professional fees 12,604
Administration fees 12,602
Fund accounting fees 11,095
Federal and state registration fees 8,306
Custody fees 4,538
Distribution fees 4,381
Trustees' fees and expenses 3,781
Reports to shareholders 1,260
Other 607
--------------
Total expenses before voluntary waiver
and reimbursement 86,228
Less: Voluntary waiver of
expenses and reimbursement
from Adviser (68,706)
--------------
Net expenses 17,522
--------------
NET INVESTMENT INCOME 21,245
--------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized gain on investments 211,791
Change in unrealized appreciation of investments (459,100)
--------------
Net realized and unrealized loss on investments (247,309)
--------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS ($226,064)
==============
SEE NOTES TO THE FINANCIAL STATEMENTS
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================================================================================
THE KENWOOD GROWTH & INCOME FUND
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
----------------- -----------------
Six months Year
ended ended
October 31, 1999 April 30, 1999
----------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income $21,245 $36,731
Net realized gain on investments 211,791 68,811
Change in unrealized appreciation of investments (459,100) (173,465)
----------------- -----------------
Net decrease in net assets from operations (226,064) (67,923)
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DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income 0 (29,079)
Distributions from net realized gains 0 (183,501)
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Total distributions 0 (212,580)
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CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 505,880 964,678
Proceeds from shares issued to shareholders in
reinvestment of dividends 0 211,962
Cost of shares redeemed (778,822) (309,490)
----------------- -----------------
Net increase (decrease) in net assets resulting
from capital share transactions (272,942) 867,150
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TOTAL INCREASE (DECREASE) IN NET ASSETS (499,006) 586,647
NET ASSETS:
Beginning of period 3,692,394 3,105,747
----------------- -----------------
End of period (including undistributed net investment
income of $34,641 and $13,396, respectively) $3,193,388 $3,692,394
================= =================
</TABLE>
SEE NOTES TO THE FINANCIAL STATEMENTS
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================================================================================
THE KENWOOD GROWTH & INCOME FUND
================================================================================
FINANCIAL HIGHLIGHTS
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<TABLE>
<CAPTION>
------------ ----------- ------------ -----------
Six months Year Year Year
ended ended ended ended
October 31, April 30, April 30, April 30,
1999 1999 1998 1997
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA1:
NET ASSET VALUE, BEGINNING OF PERIOD $12.65 $14.18 $11.20 $10.00
------------ ----------- ------------ -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.08 0.14 0.09 0.14
Net realized and unrealized gain (loss) on investments (0.88) (0.82) 3.82 1.21
------------ ----------- ------------ -----------
Total from investment operations (0.80) (0.68) 3.91 1.35
------------ ----------- ------------ -----------
LESS DISTRIBUTIONS:
Dividends from net investment income 0.00 (0.12) (0.10) (0.10)
Distributions from net realized gains 0.00 (0.73) (0.83) (0.05)
------------ ----------- ------------ -----------
Total distributions 0.00 (0.85) (0.93) (0.15)
------------ ----------- ------------ -----------
NET ASSET VALUE, END OF PERIOD $11.85 $12.65 $14.18 $11.20
============ =========== ============ ===========
TOTAL RETURN2 (6.32%) (4.44%) 35.66% 13.52%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period $3,193,388 $3,692,394 $3,105,747 $1,270,602
Ratio of net expenses to average net assets3,4 1.00% 1.00% 0.99% 0.92%
Ratio of net investment income to average net assets3,4 1.21% 1.21% 0.97% 1.85%
Portfolio turnover rate2 45.92% 70.66% 73.27% 31.21%
</TABLE>
1 INFORMATION PRESENTED RELATES TO A SHARE OF CAPITAL STOCK OF THE FUND
OUTSTANDING FOR THE ENTIRE PERIOD.
2 NOT ANNUALIZED FOR THE PERIOD ENDED OCTOBER 31, 1999.
3 ANNUALIZED FOR THE PERIOD ENDED OCTOBER 31, 1999.
4 WITHOUT VOLUNTARY EXPENSE REIMBURSEMENTS AND WAIVERS OF $68,706, $129,137,
$127,451 AND $113,568, THE RATIO OF EXPENSES TO AVERAGE NET ASSETS WOULD
HAVE BEEN 4.92%, 5.26%, 7.06% AND 26.06%, AND THE RATIO OF NET INVESTMENT
INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN (2.71%), (3.05)%, (5.10)% AND
(23.29)%, RESPECTIVELY, FOR THE PERIOD ENDED OCTOBER 31, 1999 AND THE
YEARS ENDED APRIL 30, 1999, APRIL 30, 1998 AND APRIL 30, 1997.
SEE NOTES TO THE FINANCIAL STATEMENTS
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================================================================================
THE KENWOOD GROWTH & INCOME FUND
================================================================================
SCHEDULE OF INVESTMENTS - OCTOBER 31, 1999
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SHARES VALUE
------ -----
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COMMON STOCKS - 92.1%
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AUTOS & TRANSPORTATION - 6.2%
1,090 AMR Corporation $ 69,215
500 Canadian National Railway Company 15,250
520 FDX Corporation * 22,392
245 Kansas City Southern Industries, Inc. 11,622
4,900 Tenneco Automotive, Inc. 78,400
----------------
196,879
----------------
BANKING/SAVINGS & LOANS - 10.8%
2,501 Bank One Corporation 93,944
7,600 Colonial BancGroup, Inc. 90,730
8,120 Sovereign Bancorp, Inc. 71,558
3,820 Washington Federal, Inc. 87,144
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343,376
----------------
BROADCAST SERVICES & PROGRAMMING - 1.7%
1,400 King World Productions, Inc.* 54,250
----------------
BUSINESS SERVICES - 2.0%
5,800 Modis Professional Services, Inc.* 64,888
----------------
COMPUTERS / INTEGRATED SYSTEMS - 3.2%
3,900 Diebold, Incorporated 102,375
----------------
CONSUMER DISCRETIONARY - 3.1%
2,405 American Greetings Corporation - Class A 62,229
900 The Limited, Inc. 37,013
1 Too, Inc.* 9
----------------
99,251
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ELECTRONIC EQUIPMENT - 3.1%
1,800 Avnet, Inc. 97,762
----------------
FINANCIAL SERVICES - 8.2%
1,184 Fleet Boston Corporation 51,669
1,875 The PMI Group, Inc. 97,266
5,500 United Asset Management Corporation 114,125
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263,060
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FOOD & BEVERAGES - 5.3%
4,500 Interstate Bakeries Corporation 91,125
3,300 Wendy's International, Inc. 78,788
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169,913
----------------
HEALTHCARE - 8.1%
2,600 Becton, Dickinson and Company 65,975
9,100 Bergen Brunswig Corporation 64,837
5,788 Foundation Health Corporation * 38,345
2,600 Mallinckrodt, Inc. 88,238
----------------
257,395
----------------
INTEGRATED OILS - 8.7%
2,570 Occidental Petroleum Corporation 58,628
4,670 Ultramar Diamond Shamrock Corporation 114,415
3,000 Unocal Corporation 103,500
----------------
276,543
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SEE NOTES TO THE FINANCIAL STATEMENTS
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LEISURE & ENTERTAINMENT - 5.1%
1,800 Brunswick Corporation $ 40,725
1,900 Hasbro, Inc. 39,188
6,300 Mattel, Inc. 84,263
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164,176
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MATERIALS & PROCESSING - 2.9%
2,350 Fluor Corporation 93,706
----------------
OPTICAL SUPPLIES - 0.5%
800 Ocular Sciences, Inc.* 14,700
----------------
PRINTING - 3.9%
7,500 Bowne & Co., Inc. 83,437
2,100 John H. Harland Company 39,900
----------------
123,337
----------------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 3.1%
4,900 Arden Realty, Inc. 98,612
----------------
RETAIL - 5.8%
7,900 Borders Group, Inc.* 102,700
8,200 KMart Corporation * 82,513
----------------
185,213
----------------
SECURITY SERVICES - 3.2%
5,400 Pittston Brink's Group 103,462
----------------
SOFTWARE - 3.8%
5,600 Sterling Software, Inc.* 122,850
----------------
TECHNOLOGY - 0.2%
305 Novell, Inc. * 6,119
----------------
UTILITIES - 3.2%
3,810 Alliant Energy Corporation 103,584
----------------
TOTAL COMMON STOCKS (COST OF $3,194,816) 2,941,451
Principal
Amount
------------------------------------------------
SHORT-TERM INVESTMENTS - 8.7%
------------------------------------------------
VARIABLE RATE DEMAND NOTES - 8.7%
$165 American Family Financial Services, Inc., 4.99% 165
12,656 General Mills, Inc., 5.01% 12,656
7,226 Warner-Lambert Company, 4.99% 7,226
137,501 Wisconsin Corporate Central Credit Union, 5.08% 137,501
121,313 Wisconsin Electric Power Company, 4.99% 121,313
----------------
278,861
----------------
TOTAL SHORT-TERM INVESTMENTS (COST OF $278,861) 278,861
----------------
TOTAL INVESTMENTS - 100.8% (COST OF $3,473,677) 3,220,312
Liabilities, less Other Assets - (0.8)% (26,924)
----------------
TOTAL NET ASSETS - 100.0% $3,193,388
================
* NON-INCOME PRODUCING SECURITY.
SEE NOTES TO THE FINANCIAL STATEMENTS
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================================================================================
THE KENWOOD GROWTH & INCOME FUND
================================================================================
NOTES TO THE FINANCIAL STATEMENTS
================================================================================
1). ORGANIZATION
The Kenwood Growth & Income Fund (the "Fund") is a mutual fund
created by The Kenwood Funds (the "Trust") which was organized as a business
trust under the laws of Delaware on January 9, 1996. The Fund is the sole series
issued by the Trust, which is an open-end management investment company
registered under the Investment Company Act of 1940 ("1940 Act"), as amended.
The Fund commenced operations on May 1, 1996. The objective of the Fund is
capital appreciation and current income.
2). SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
a). Investment Valuation - Securities which are traded on a securities exchange
(including options on indexes so traded) or securities listed on the NASDAQ
National Market are valued at the last sale price on the exchange or market
where primarily traded or listed or, if there is no recent sale price available,
at the last current bid quotation. Securities not so traded or listed are valued
at the last current bid quotation if market quotations are available. Debt
securities maturing in 60 days or less are normally valued at amortized cost.
Debt securities having maturities over 60 days or for which amortized cost is
not deemed to reflect fair value, may be priced by independent pricing services
that use prices provided by market makers or estimates of market values obtained
from yield data relating to instruments or securities with similar
characteristics. Other securities, including restricted securities, and other
assets are valued at fair value as determined in good faith by the Board of
Trustees.
b). Federal Income Taxes - No provision for federal income taxes or excise taxes
has been made since the Fund has elected to be taxed as a "regulated investment
company" and intends to distribute substantially all taxable income to its
shareholders and otherwise comply with the provisions of the Internal Revenue
Code applicable to regulated investment companies.
c). Expenses - The Fund is charged for those expenses that are directly
attributable to the portfolio, such as advisory, administration and certain
shareholder service fees.
d). Distributions to Shareholders - Dividends from net investment income are
declared and paid at least annually. Distributions of net realized capital
gains, if any, will be declared at least annually.
e). Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
f). Other - Investment and shareholder transactions are accounted for on the
trade date. The Fund determines the gain or loss realized from investment
transactions by comparing the original cost of the security lot sold with the
net sales proceeds. Dividend income is recognized on the ex-dividend date and
interest income is recognized on an accrual basis.
3). CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund were as follows:
Six Months Year
ended ended
Oct. 31, 1999 April 30, 1999
----------------- -----------------
Shares sold 38,091 78,586
Shares issued to owners in
reinvestment of dividends 0 17,797
----------------- -----------------
38,091 96,383
Shares redeemed (60,514) (23,486)
----------------- -----------------
Net increase (22,423) 72,897
================= =================
NOTES TO THE FINANCIAL STATEMENTS - CONT'D.
================================================================================
4). INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding
short-term investments, for the Fund for the six months ended October 31, 1999,
were as follows:
Purchases Sales
-----------------------------------
U. S. Government -- --
Other $1,176,167 $1,466,767
At October 31, 1999, gross unrealized appreciation and
depreciation of investments for federal income tax purposes was as follows:
Appreciation $244,250
(Depreciation) (574,294)
---------
Net unrealized appreciation
on investments ($330,044)
----------
At October 31, 1999, the cost of investments for federal income
tax purposes was $3,550,356.
5). INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Trust has entered into an investment advisory agreement with
The Kenwood Group, Inc. (the "Adviser"). Pursuant to its Advisory Agreement with
the Fund, the Adviser is entitled to receive a fee, calculated daily and payable
monthly, at the annual rate of 0.75% on the first $500 million of average net
assets, 0.70% on the next $500 million of average daily net assets, and 0.65% on
the average daily net assets over $1 billion. The Adviser has voluntarily waived
and reimbursed certain expenses to the extent 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) exceeded the annual rate of 1.00% of the average net assets of the Fund,
computed on a daily basis. The total amount of fees waived and reimbursed by the
Adviser for the six months ended October 31, 1999 was $68,706.
The Trust has entered into a distribution agreement with
AmeriPrime Financial Securities, Inc. (the "Distributor"). Pursuant to the
Distribution Plan adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act,
the Fund is authorized to expend up to 0.25% annually of the Fund's average
daily net assets to pay distribution fees and to cover certain expenses incurred
in connection with the distribution of the Fund's shares. Rule 12b-1 permits an
investment company to finance, directly or indirectly, any activity which is
primarily intended to result in the sale of its shares only if it does so in
accordance with the provisions of the Rule.
6). RELATED PARTIES
Officers and Trustees of the Trust held 85,449 shares or 31.7% of
the outstanding shares of the Fund as of October 31, 1999.
