Semi-Annual Report to Shareholders
SAND HILL PORTFOLIO MANAGER FUND
A Series of
the World Fund, Inc.
a "Series" Investment company
For the Pierod Ended
February 28, 1999
<PAGE>
Schedule of Portfolio Investments
February 28,1999 (Unaudited)
Number
of Market
Shares Security Description Value
- ----------- -------------------------- -----------
COMMON STOCK: 67.58%
CAPITAL GOODS: 3.77%
5,800 Dover Corp. $ 197,200
4,300 Johnson Controls Inc. 264,450
---------
461,650
---------
COMMUNICATION SERVICES: 5.80%
3,900 Ameritech Corp. 254,963
4,000 Airtouch Communications* 364,250
5,400 Hong Kong Telecom 90,788
---------
710,001
---------
CONSUMER CYCLICALS: 7.31%
11,400 Leggett & Platt, Inc. 238,688
4,400 Manpower, Inc. 105,325
5,000 Servicemaster Co. 93,438
9,700 Sherwin-Williams Co. 233,406
3,000 Sony ADR 224,063
----------
894,920
----------
CONSUMER STAPLES: 11.38%
4,000 Albertsons, Inc. 228,000
2,000 Carlton Communications PLC ADR 98,500
5,250 Newell Co. 223,125
7,100 Panamerican Beverages, Inc. 112,269
6,500 Pepsico, Inc. 244,563
6,600 Sara Lee Corp. 179,438
4,000 Walgreen Co. 128,000
5,800 Whole Foods Markets* 179,075
----------
1,392,970
----------
ENERGY: 4.86%
1,200 BP Amoco ADR 102,000
2,800 Mobil Corp. 232,925
12,000 Nabors Industries* 138,000
2,500 Schlumberger Ltd. 121,405
----------
594,330
----------
FINANCIALS: 6.27%
4,000 CMAC Investment Corp 165,250
400 HSBC Hldgs PLC ADR 109,951
4,100 MBIA, Inc. 252,405
800 MGIC Investment Corp. 27,250
5,600 Regions Financial Corp. 212,800
----------
767,656
----------
HEALTHCARE: 10.42%
2,900 Amgen, Inc.* 362,137
5,500 Becton Dickinson Co. 184,250
1,800 Elan Corp 138,037
1,300 Johnson & Johnson 110,987
6,400 HCR Manor Care, Inc.* 143,200
800 Roche Hldg ADR 101,876
4,200 Schering-Plough Corp. 234,938
----------
1,275,425
----------
REIT: 1.89%
5,900 Apartment Invst/Mgmt Co. 230,838
----------
TECHNOLOGY: 13.66%
4,375 Cambridge Tech.* 109,922
3,500 EMC Corp.* 358,313
5,200 Grainger (W.W.), Inc. 231,400
2,200 Intel Corp. 263,863
104 Momentum Business Applicants* 897
1,900 Northern Telecom LTD. 110,319
5,200 PeopleSoft, Inc.* 98,150
5,000 Sungard Data Systems* 198,125
3,100 Sun Microsystems* 301,669
----------
1,672,658
----------
TRANSPORTATION: 0.76%
2,700 Gatx Corp. 93,318
----------
UTILITIES: 1.46%
6,900 Nipsco Industries 178,969
----------
TOTAL COMMON STOCKS:
(Cost: $5,973,302) 8,272,735
----------
Principal
Amount U.S. GOVT. SECURITIES: 21.43%
- ---------
LONG TERM: 19.78%
500,000 U.S. Treasury Note
maturity date 07/31/00; 6.125% 506,563
600,000 U.S. Treasury Note
maturity date 02/28/01; 5.625% 605,438
300,000 U.S. Treasury Note
maturity date 09/30/02; 5.875% 305,813
200,000 U.S. Treasury Note
maturity date 01/31/03; 5.5% 201,438
200,000 U.S. Treasury Note
maturity date 2/15/03; 6.25% 206,688
300,000 U.S. Treasury Note
maturity date 02/15/04; 5.875% 307,688
300,000 U.S. Treasury Note
maturity date 11/15/08; 4.75% 288,000
----------
TOTAL LONG TERM
U.S. GOVERNMENT SECURITIES: 2,421,628
(Cost: $2,401,865) ----------
SHORT TERM: 1.65%
$100,000 U.S. Treasury Note
maturity date 07/31/99; 5.875% 100,405
100,000 U.S. Treasury Note
maturity date 10/31/99; 7.5% 101,655
----------
TOTAL SHORT TERM
U.S. GOVERNMENT SECURITIES: 202,060
(Cost: $201,035) ----------
TOTAL INVESTMENTS:
(Cost: $8,576,202)** 89.01% $ 10,896,423
Other assets, net 10.99% 1,345,387
------ --------------
NET ASSETS 100.00% $ 12,241,810
======= ==============
* Non-income producing
** Cost for Federal income tax purpose is $8,576,202 and net unrealized
appreciation consists of:
Gross unrealized appreciation $ 2,667,484
Gross unrealized depreciation (347,263)
--------------
Net unrealized appreciation $ 2,320,221
==============
ADR--Security represented is held by the custodian bank in the form of American
Depository Receipts
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Investments at value
(identified cost of $8,576,202) (Notes 1 & 3) $10,896,423
Cash 1,310,947
Receivable for:
Dividends $ 8,202
Interest 35,983
--------- 44,185
Deferred organization costs (Note 1) 8,083
------------
TOTAL ASSETS 12,259,638
------------
LIABILITIES
Due to investment advisor 9,478
Accrued expenses 8,350
------------
TOTAL LIABILITIES 17,828
------------
NET ASSETS $12,241,810
============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE ($12,241,810 / 840,506 shares outstanding) $14.57
============
At February 28, 1999 there were 50,000,000 shares of $.01 par value stock
authorized and components of net assets are:
Paid in capital $10,184,279
Undistributed net investment income 12,725
Accumulated net realized loss (275,415)
Net unrealized appreciation of investments 2,320,221
------------
Net assets $12,241,810
============
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
Period ended February 28,1999 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 74,837
Dividend 52,708
---------
Total income $ 127,545
-------------
EXPENSES:
Investment advisory fees (Note 2) 58,235
Transfer agent fees (Note 2) 11,609
Legal and audit fees 2,866
Registration fees 2,338
Recordkeeping and 11,647
administrative services (Note 2)
Shareholder servicing and 12,109
reports (Note 2)
Organization expense 3,421
amortization
Miscellaneous 8,607
---------
Total expenses 110,832
------------
Net investment income 16,713
------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain on investments 130,984
Net increase in unrealized
appreciation on investments 1,334,790
------------
Net gain on investments 1,465,774
------------
Net increase in net assets
resulting from operations $ 1,482,487
============
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Period Period Year
ended ended ended
February 28, August 31, December 31,
1999 (Unaudited) 1998 (A) 1997
----------------- ---------- --------------
OPERATIONS
Net investment income $16,713 $46,559 $57,124
Net realized gain
on investments 130,984 208,774 265,654
Change in unrealized
appreciation
(depreciation)
of investments 1,334,790 (1,031,352) 984,658
----------- ----------- -----------
Net increase (decrease)
in net assets
resulting from
operations 1,482,487 (776,019) 1,307,436
DISTRIBUTION TO
SHAREHOLDERS FROM:
Net investment income
($.08, $ -- and $.08
per share, respectively) (55,461) -- (52,211)
Capital gains
($.85, $ -- and $.43 per
share, respectively) (673,457) -- (280,635)
CAPITAL SHARE TRANSACTIONS
Net increase in net
assets resulting from
capital share transactions* 1,118,347 579,796 3,132,102
----------- --------- -------------
Net increase(decrease)
in net assets 1,871,916 (196,223) 4,106,692
Net assets at
beginning of period 10,369,894 10,566,117 6,459,425
----------- ---------- -------------
NET ASSETS at the end
of the period
(including undistributed
net investment income
of $12,725, $51,473,
and $4,913 respectively) $12,241,810 $10,369,894 $10,566,117
=========== =========== ===========
* a summary of capital share transactions follows:
Period ended
February 28, 1999 Period ended Year ended
(unaudited) August 31, 1998 (A) December 31, 1997
----------- ------------------- ------------------
Shares Value Shares Value Shares Value
------- ------- ------ --------- --------- ----------
Shares sold 74,287 $1,101,898 121,845 $1,852,309 240,636 $3,384,487
Shares
reinvested 48,380 692,324 -- -- 21,704 318,619
from dividends
Shares redeemed (45,164) (675,875) (83,865) (1,272,513) (42,017) (571,004)
------- ---------- -------- --------- -------- ---------
Net increase 77,503 $1,118,347 37,980 $ 579,796 220,323 $3,132,102
======= ========= ======== ========== ======== ==========
(A) The Fund has changed its year end from December 31st to August 31st. This
represents the period from January 1, 1998 to August 31, 1998.
See Notes to Financial Statements
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
Period Jan. 2,
ended Period Years ended 1995 *
Feb. 28, ended December 31, to
1999 Aug. 31, ---------------- Dec. 31,
(Unaudited) 1998*** 1997 1996 1995
---------- ------- ---- ---- ----
Per Share
Operating Performance
Net asset value,
beginning of period $13.59 $14.57 $12.79 $11.11 $10.00
------ ------ ------ ------ ------
Income from investment
operations-
Net investment income 0.03 0.06 0.09 0.14 0.06
Net realized and
unrealized gain on
investments 1.88 (1.04) 2.20 2.02 1.10
----- ------ ----- ----- ----
Total from
investment
operations 1.91 (0.98) 2.29 2.16 1.16
---- ----- ---- ---- ----
Less distributions-
Distributions from
net investment
income (0.08) -- (0.08) (0.15) (0.05)
Distributions from
capital gains (0.85) -- (0.43) (0.33) 0.00
----- ----- ----- ----- ----
Total
distributions (0.93) 0.00 (0.51) (0.48) (0.05)
------ ---- ------ ------ ------
Net asset value,
end of period $14.57 $13.59 $14.57 $12.79 $11.11
====== ====== ====== ====== ======
Total Return 14.27% (6.73%) 17.87% 19.57% 11.60%
Ratios/Supplemental Data
Net assets, end of
period (000's) $12,242 $10,370 $10,566 $6,459 $4,025
Ratio to average net
assets - (A)
Expenses (B) 1.90%** 2.08%** 2.08% 2.50% 3.03**
Expense ratio-net(C) 1.90%** 1.86%** 1.90% 2.00% 1.90**
Net investment income 0.29%** 0.62%** 0.71% 1.29% 0.52**
Portfolio
turnover rate 20.15% 30.19% 16.48% 32.97% 40.96%
* Commencement of operations
** Annualized
*** The Fund has changed its year end from December 31st to August 31st.
This represents the period from January 1, 1998 to August 31, 1998.
(A) Management fee waivers reduced the expense ratios and increased the net
investment income ratio by .64% in 1996 and 1.00% in 1995.
(B) Expense ratios has been increased to include custodian fees which were
offset by custodian credits.
(C) Expense ratio - net reflects the effect of the custodian fee credits the
fund received.
See Notes to Financial Statements
<PAGE>
Notes to the Financial Statements
February, 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES-The Sand Hill Portfolio Manager Fund (the
"Fund") is a series of The World Funds, Inc. ("TWF") which is registered under
The Investment Company Act of 1940, as amended, as a diversified open-end
management company. The Fund was established in January 2, 1995 as a series of
TWF which has allocated to the Fund 50,000,000 shares of its 500,000,000 shares
of $.01 par value common stock. The following is a summary of significant
accounting policies consistently followed by the Fund. The policies are in
conformity with generally accepted accounting principles.
The investment objective of the Fund is to maximize total return by investing in
equity securities, debt securities and short-term investments.
A. Security Valuation. Investments in securities traded on a national securities
exchange or included in the NASDAQ National Market System are valued at the last
reported sales price; other securities traded in the over-the-counter market and
listed securities for which no sale is reported on that date are valued at the
last reported bid price. Short-term investments (securities with a remaining
maturity of sixty days or less) are valued at cost which, when combined with
accrued interest, approximates market value.
B. Federal Income Taxes. The Fund intends to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no federal
income tax provision is required.
C. Security Transactions and Income. As is common in the industry, security
transactions are accounted for on the trade date. Dividend income is recorded on
the ex-dividend date. Interest income is recorded on an accrual basis.
D. Deferred Organizational Expenses. All of the expenses of TWF incurred in
connection with its organization and the public offering of its shares have been
assumed by the series funds of TWF. The organization expenses allocable to Sand
Hill Portfolio Manager Fund are being amortized over a period of fifty-seven
(57) months.
E. Distributions to Shareholders. Distributions from net investment income and
realized gains, if any, are recorded on the ex-dividend date. Income
distributions and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These distribution differences primarily result from different
treatments of equalization and post-October capital losses.
F. Accounting Estimates. In preparing financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.
NOTE 2-INVESTMENT MANAGEMENT AND DISTRIBUTION AGREEMENTS-Pursuant to an
Investment Advisory Agreement, the Advisor, Sand Hill Advisors ("SHA") provides
investment services for an annual fee of 1.0% of the first $100 million of
average daily net assets and .75% on average daily net assets over $100 million.
As provided in the Administrative Agreement, the Fund reimbursed Commonwealth
Shareholder Services, Inc. ("CSS"), its Administrative Agent, $17,723 for
providing shareholder services, recordkeeping, administrative services and
blue-sky filings. The Fund compensates CSS for blue-sky filings and certain
shareholder servicing on an hourly rate basis. For other administrative
services, CSS receives .20% of average daily net assets.
Fund Services, Inc. ("FSI") is the Fund's Transfer and Dividend Disbursing
Agent. FSI received $11,609 for its services for the period ended February
28, 1999.
Certain officers and/or directors of the Fund are also officers and/or directors
of CSS and FSI.
NOTE 3-INVESTMENTS/CUSTODY-The cost of purchases and the proceeds from sales
of securities, excluding short-term securities and U.S. Government securities,
for the period ended February 28, 1998, were $3,085,545 and $1,980,925,
respectively.
The custodian has provided credits against custodian charges based on credits on
uninvested cash balances of the Fund in the amounts of $16,807 and $13,445 for
the periods ended August 31, 1998 and December 31, 1997 respectively.
