Semi-Annual Report to Shareholders
CSI Equity Fund
CSI Fixed Income Fund
CSI Capital Management
Financial Advisors
Investment Counsel
For the Period Ended
February 29, 2000
<PAGE>
CSI EQUITY FUND
Schedule of Portfolio Investments (Unaudited)
February 29, 2000
Number of Market
Shares Description Value
--------- ----------- --------
Common Stocks: 94.92%
BANKING: 5.08%
27,800 Bancone 717,587
25,075 Citigroup 1,296,064
13,600 Deutsche Bank ADR 1,144,420
18,318 Ing Groep N.V. ADR 944,522
-----------
4,102,593
-----------
BEVERAGES: 3.50%
26,600 Heineken N.V. ADR 1,343,265
45,900 Pepsico Inc. 1,480,275
----------
2,823,540
----------
CHEMICALS: 4.71%
22,100 Bayer A.G. ADR 920,266
21,200 Du Pont (E.I.) De Nemours 1,070,600
24,700 Monsanto Corp. 958,669
21,200 Rohm and Haas Co. 855,950
----------
3,805,485
----------
COMPUTER AND PERIPHERALS: 9.30%
23,100 Compaq Computer Corp. 574,612
33,200 Cisco Systems, Inc.* 4,388,625
21,400 EMC Corp* 2,546,600
----------
7,509,837
----------
COMPUTER SOFTWARE AND SERVICES: 9.61%
25,600 Automatic Data Processing 1,115,200
62,200 ORACLE Corporation* 4,618,350
28,400 SAP AG ADR 2,025,275
----------
7,758,825
----------
DRUG AND MEDICAL: 8.04%
22,779 Aventis 1,184,508
32,000 Abbott Laboratories 1,048,000
19,800 Johnson & Johnson 1,420,650
11,800 Roche Holdings 1,271,714
18,300 Warner Lambert 1,565,794
----------
6,490,666
----------
ELECTRONICS/EQUIPMENT: 11.92%
23,100 Emerson Electric Co. 1,052,494
12,400 Hewlett-Packard Co. 1,667,800
22,400 Nokia Corp. ADR* 4,442,200
5,500 Sony Corp. 1,723,563
34,000 Xerox 737,375
----------
9,623,432
----------
FOOD: 3.26%
28,600 Diageo PLC ADR 881,238
26,300 Groupe Danone ADR 1,058,575
8,200 Nestle S.A. ADR 691,308
----------
2,631,121
----------
FOOTWARE AND APPAREL: 0.60%
18,300 Adidas ADR* 486,290
----------
HOUSEHOLD: 2.67%
19,000 Kimberly-Clark Corp. 982,062
25,700 Unilever N.V. 1,169,350
----------
2,151,412
----------
INSURANCE: 2.84%
21,700 AXA ADR 1,367,100
2,100 Zurich Allied* 187,050
17,400 Zurich Insurance 739,326
----------
2,293,476
----------
MANUFACTURING: 7.92%
18,400 Corning Inc. 3,459,200
13,000 Daimler Chrysler* 880,750
16,100 Deere & Co. 575,575
16,800 Minnesota Mining and Manufacturing Co. 1,480,500
----------
6,396,025
----------
MULITMEDIA: 1.60%
38,600 Disney Walt Co. 1,293,100
----------
OIL: 2.49%
20,100 Repsol S.A. ADR 384,413
15,900 Schlumberger 1,174,613
4,900 Total Fina ADR 328,913
3,078 Transocean Sedco 121,388
----------
2,009,327
----------
RETAIL: 4.09%
35,800 Albertsons Inc. 877,100
40,200 Borders Group Inc.* 494,962
33,300 Home Depot Inc. 1,925,156
----------
3,297,218
----------
SEMI-CONDUCTORS: 8.38%
24,500 Intel Corp. 2,768,500
20,000 STMicroelectronics 4,000,000
----------
6,768,500
----------
TELECOMMUNICATIONS: 6.70%
18,700 AT&T 924,481
14,600 Lucent Technologies 868,700
24,350 MCI World Communications* 1,086,619
20,000 Tellabs Inc.* 960,000
27,250 Vodafone Airtouch Communications 1,571,984
----------
5,411,784
----------
TRANSPORTATION: 1.26%
29,200 FDX Corporation* 1,020,175
----------
UTILITIES: 0.95%
23,400 Texas Utilities 763,425
----------
TOTAL COMMON STOCKS:
(Cost: $53,528,849) 76,636,231
----------
SHORT-TERM INVESTMENTS: 2.48%
2,002,616 Star Treasury Fund 2,002,616
(Cost: $2,002,616) ----------
TOTAL INVESTMENTS:
(Cost: $55,531,465)** 97.40% 78,638,847
Other assets, net 2.60% 2,102,960
------- ----------
NET ASSETS 100.00% $80,741,807
====== ===========
* Non-income producing
**Cost for Federal income tax purposes is $55,433,365 and net unrealized
appreciation consists of:
Gross unrealized appreciation 28,943,899
Gross unrealized depreciation (5,836,517)
-----------
Net unrealized appreciation $23,107,382
===========
ADR- Security represented is held by the custodian bank in the form of American
Depository Receipts.
See Notes to Financial Statements
<PAGE>
CSI EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2000(Unaudited)
- ------------------------------------
ASSETS
Investments at value (identified cost of $55,531,465)
(Notes 1 & 3) $78,638,84
Receivables:
Dividend $ 44,028
Interest 3,803
Fund shares purchased 2,088,695
----------
2,136,526
Deferred organization cost (Note 1) 28,019
Other assets 1,251
----------
TOTAL ASSETS 80,804,643
----------
LIABILITIES
Investment management fees 60,903
Accrued expenses 1,933
----------
TOTAL LIABILITIES 62,836
----------
NET ASSETS $80,741,80
==========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE ($80,741,807/4,893,484 shares
outstanding) $ 16.50
==========
At February 29, 2000 there were 50,000,000 shares of $.01 par value stock
authorized and components of net assets are:
Paid in capital $58,578,420
Accumulated net investment loss (149,147)
Accumulated net realized loss on investments (794,848)
Net unrealized appreciation of investments 23,107,382
----------
Net assets $80,741,807
==========
See Notes to Financial Statements
<PAGE>
CSI EQUITY FUND
STATEMENT OF OPERATIONS
Six months ended February 29, 2000 (Unaudited)
- ----------------------------------------------
INVESTMENT INCOME
Dividend $ 309,842
Interest 22,453
----------
Total income $ 332,295
-----------
EXPENSES
Investment management fees (Note 2) 323,459
Recordkeeping and administrative services 60,951
Custodian and accounting fees 26,322
Audit and legal fees 17,608
Transfer agent fees 11,654
Registration fees 12,880
Shareholder servicing and reports 9,869
Organization expense amortization 5,133
Other expenses 13,566
----------
Total expenses 481,442
-----------
Net investment loss (149,147)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (200,087)
Net change in unrealized appreciation on investments 14,105,273
-----------
Net gain on investments 13,905,186
-----------
Net increase in net assets resulting from operations $13,756,039
===========
See Notes to Financial Statements
<PAGE>
CSI EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------
Six months ended
February 29, 2000 Year ended Period ended
(Unaudited) August 31, 1999 August 31, 1988*
---------------- --------------- ----------------
OPERATIONS
Net investment income (loss) $(149,147) $ (61,940) $ 60,814
Net realized loss on investments (200,087) (570,895) 121
Change in net unrealized
Appreciation (depreciaton)
of investments 14,105,273 10,984,834 (1,982,725)
---------- ---------- ----------
Net increase (decrease)
in net assets resulting
from operations 13,756,039 10,351,999 (1,921,790)
DISTRIBUTION TO SHAREHOLDERS FROM
Net investment income
($-- and $-.02 per share) -- (64,879) --
Capital gains -- -- --
CAPITAL SHARE TRANSACTIONS
Net increase in net assets
resulting from capital share
transactions** 14,061,356 16,061,049 28,498,033
---------- ---------- ----------
Net increase in net assets 27,817,395 26,348,169 26,576,243
Net assets at beginning
of period 52,924,412 26,576,243 --
---------- ---------- ----------
NET ASSETS at the end of the
Period (including undistributed
net investment loss of ($222,034)
and ($72,886), respectively)
$80,741,807 $52,924,412 26,576,243
=========== =========== ==========
** A summary of capital share transactions follows:
Six months ended
February 29, 2000 Year ended
(Unaudited) August 31, 1999
------------------- --------------------
Shares Value Shares Value
--------- ---------- --------- ----------
Shares sold 1,006,685 $15,102,204 1,470,603 $18,610,831
Shares reinvested
from distribution --- --- 4,869 64,657
Shares redeemed (73,215) (1,040,848) (206,346) (2,614,439)
--------- ---------- --------- ----------
Net increase 933,470 $14,061,356 1,269,126 $16,061,049
======== =========== ========= ===========
See Notes to Financial Statements
<PAGE>
CSI EQUITY FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ----------------------------------------------
Six months ended
February 29, 2000 Year ended Year ended
Unaudited) August 31, 1999 August 31, 1998*
----------------- --------------- ---------------
Per Share Operating Performance
Net asset value, beginning of period $13.36 $9.88 $10.00
------ ------ ------
Income from investment operations-
Net investment income (loss) (0.05) (0.02) 0.02
Net realized and unrealized gain 3.19 3.52 (0.14)
------ ------ ------
Total from investment operations 3.14 3.50 (0.12)
------ ------ ------
Less distributions-
Distributions from net investment -- (0.02) --
Distributions from capital gains -- -- --
------ ------ ------
Total distributions (0.02) --
Net asset value, end of period $16.50 $13.36 $9.88
====== ====== ======
Total Return 23.50% 35.21% (1.20%)
====== ====== ======
Ratios/Supplemental Data
Net assets, end of period (000's) $80,742 $52,924 $26,576
Ratio to average net assets-
Expenses (A) 1.48%* 1.50% 1.50%**
Expenses-net (B) 1.48%* 1.50% 1.49%**
Net investment income (0.46%)* (0.15%) 0.42%**
Portfolio turnover rate 2.33% 12.91% 8.16%
* Commencement of operations October 15, 1997
** Annualized
(A) Expense ratio has been increased to include custodian fees which were offset
by custodian credits for the period ended August 31, 1998.
(B) Expense ratio - net reflects the effect of the custodian fee credits the
fund received for the period ended August 31, 1998.
See Notes to Financial Statements
<PAGE>
Notes to the Financial Statements
February 29, 2000
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
The CSI Equity 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 1997 as a series of TWF which has allocated to the Fund 50,000,000 of its
500,000,000 shares of $.01 par value common stock.
The objective of the Fund is to seek to achieve growth of capital by
investing in a portfolio composed of common stocks and securities convertible
into common stocks, such as, warrants, convertible bonds, debentures or
convertible preferred stock. In seeking to meet its objective, the Fund will
invest on a global basis.
The following is a summary of significant accounting policies consistently
followed by the Fund. The policies are in conformity with generally accepted
accounting principles.
A. Security Valuation. Investments traded on stock exchanges are valued at
the last quoted sales price on the exchange on which the securities are traded
as of the close of business on the last day of the period or, lacking any sales,
at the last available bid price. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange designated by or
under the authority of the Fund's Board of Directors. Securities traded in the
over-the-counter market are valued at the last available sale price in the
over-the-counter market prior to time of valuation. Temporary investments in
U.S. dollar denominated short-term investments are valued at amortized cost,
which approximates market. Portfolio securities which are primarily traded on
foreign exchanges are generally valued at the closing price on the exchange on
which they are traded, and those values are then translated into U.S. dollars at
the current exchange rate.
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. Security transactions are accounted
for on the trade date. The cost of securities sold is determined generally on a
first-in, first-out basis. Dividends are recorded on the ex-dividend date.
Interest income is recorded on an accrual basis.
D. Currency Translation. The market values of foreign securities, currency
holdings, other assets and liabilities initially expressed in foreign currencies
are recorded in the financial statements after translation to U.S. dollars based
on the exchange rates at the end of the period. The cost of such holdings is
determined using historical exchange rates. Income and expenses are translated
at approximate rates prevailing when accrued or incurred. Foreign securities and
currency transactions may involve certain considerations and risks not typically
associated with those of domestic origin.
E. Distribution to Shareholders. Distribution from 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 differences are primarily due to differing treatments for
foreign currency transactions, net operating losses and post-October capital and
currency losses.
F. Use of 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 AND OTHER
Pursuant to an Investment Advisory Agreement, the Advisor, CSI Capital
Management, Inc. ("CSI") provides investment services for an annual fee of
1.00% of average daily net assets of the Fund.
As provided in the Administrative Agreement, the Fund reimbursed
Commonwealth Shareholder Services, Inc. ("CSS"), its administrative agent,
$43,426 for providing shareholder services, recordkeeping, administrative
services and blue-sky filings. The Fund compensates CSS for blue-sky and certain
shareholder servicing on an hourly rate basis. For other administrative
services, CSS receives 0.20% of average daily net assets of the Fund on the
first $50 million, 0.15% per annum of the average daily net assets from $50
million to $100 million, and 0.10% per annum of the average daily net assets
over $100 million, with a minimum fee of $15,000.
Fund Services, Inc. ("FSI") is the Fund's Transfer and Dividend
Disbursing Agent. FSI received $11,654 for its services for the six months
ended February 29, 2000.
Certain officers and/or directors of the Fund are also officers and/or
directors of CSI, CSS, and FSI.
NOTE 3-INVESTMENTS/CUSTODY
The cost of purchases and the proceeds from sales of securities other than
short-term notes aggregated $13,206,223 and $1,469,878 respectively.
<PAGE>
CSI Fixed Income
Schedule of Portfolio Investments
February 29, 2000
(Unaudited)
- -----------------------------------
Principal Market
Amount Description Value
- ----------- ----------- -----------
U.S. GOVERNMENT SECURITIES: 69.97%
MATURES IN OVER 10 YEARS: 20.18%
$5,750,000 U.S. Treasury Bond 6.00%; February 15, 2026 $5,500,236
4,250,000 U.S. Treasury Bond 6.75%; August 15, 2026 4,467,813
1,000,000 U.S. Treasury Bond 5.50%; August 15, 2028 1,786,876
-----------
11,754,925
-----------
MATURES IN 6-10 YEARS: 19.48%
2,750,000 U.S. Treasury Note 6.50%; May 15, 2005 2,731,094
2,750,000 U.S. Treasury Note 5.875%; November 15, 2005 2,646,875
2,750,000 U.S. Treasury Note 5.625%; February 15, 2006 2,610,781
2,500,000 U.S. Treasury Note 6.125%; August 15, 2007 2,421,875
1,000,000 U.S. Treasury Note 5.625%; May 15, 2008 936,875
-----------
11,347,500
-----------
MATURES IN 0-5 YEARS: 30.31%
2,000,000 U.S. Treasury Note 6.875%; March 31, 2000 2,001,876
1,000,000 U.S. Treasury Note 5.375%; July 31, 2000 997,500
2,500,000 U.S. Treasury Note 5.25%; January 31, 2001 2,475,783
2,750,000 U.S. Treasury Note 5.625%; May 15, 2001 2,725,080
1,000,000 U.S. Treasury Note 5.875%; November 30, 2001 989,063
3,000,000 U.S. Treasury Note 5.75%; October 31, 2002 2,940,000
3,000,000 U.S. Treasury Note 6.25%; February 15, 2003 2,970,000
2,500,000 U.S. Treasury Note 7.25%; August 15, 2004 2,556,250
-----------
17,655,552
-----------
TOTAL U.S. GOVERNMENT SECURITIES:
(Cost:$42,787,359) 40,757,977
-----------
SHORT-TERM INVESTMENTS: 25.19%
14,668,448 Star Treasury Fund
(Cost:$14,668,448) 14,668,448
-----------
TOTAL INVESTMENTS:
(Cost:$57,455,807)* 95.16% $55,426,425
Other assets, net 4.84% 2,820,637
-----------
NET ASSETS 100.00% $58,247,062
===========
* Cost for Federal income tax purposes is $57,455,807 and net unrealized
depreciation consists of:
Gross unrealized appreciation $ --
Gross unrealized depreciation (2,029,382)
------------
Net unrealized depreciation $ (2,029,382)
============
See Notes to Financial Statements
<PAGE>
CSI FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
February 29, 20(Unaudited)
- --------------------------
ASSETS
Investments at value (identified cost of $57,455,807)
(Notes 1 & 3) $55,426,425
Receivables:
Interest $ 415,728
Capital stock sold 2,393,730
----------
2,809,458
Deferred organization costs (Note 1) 28,133
Prepaid expenses 6,407
-----------
TOTAL ASSETS 58,270,423
-----------
LIABILITIES
Investment management fees 21,881
Accrued expenses 1,480
-----------
TOTAL LIABILITIES 23,361
-----------
NET ASSETS $58,247,062
===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE ($58,247,062/6,009,711 shares outstanding) $9.69
=======
At February 29, 2000 there were 50,000,000 shares of $.01 par
value stock authorized and components of net assets are:
Paid in capital $60,222,401
Undistributed net investment income 36,644
Undistributed net realized gain on investments 17,399
Net unrealized depreciation of investments (2,029,382)
-----------
Net Assets $58,247,062
===========
See Notes to Financial Statements
<PAGE>
CSI FIXED INCOME FUND
STATEMENT OF OPERATIONS
Six months ended February 29, 2000 (Unaudited)
- -----------------------------------------------
INVESTMENT INCOME
Interest $1,408,560
-----------
EXPENSES
Investment management fees (Note 2) $264,491
Recordkeeping and administrative services 52,054
Custodian and accounting fees 15,742
Audit and legal fees 11,942
Shareholder servicing and reports 10,226
Registration fees 12,408
Transfer agent fees 11,363
Organization expense amortization 5,133
Other expenses 12,511
--------
Total expenses 395,870
Fee waivers (132,245)
----------
Net expenses 263,625
----------
Net investment income 1,144,935
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net change in unrealized depreciation on investments (355,995)
----------
Net loss on investments (355,995)
----------
Net increase in net assets resulting from operations $ 788,940
==========
See Notes to Financial Statements
<PAGE>
CSI FIXED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------
Six months ended
February 29, 2000 Year ended
(Unaudited) August 31, 1999
----------------- ---------------
OPERATIONS
Net investment income $1,144,935 $1,741,045
Net realized gain on investments -- 17,399
Change in net unrealized depreciation
Of investments (355,995) (2,548,398)
----------- ----------
Net increase(decrease) in net assets
resulting from operations 788,940 (789,954)
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income
($.20 and $.61 per share, respectively) (1,110,494) (2,452,926)
Capital gains -- --
CAPITAL SHARE TRANSACTIONS
Net increase in net assets resulting
from capital share transactions* 9,963,136 17,948,035
------------ ----------
Net increase in net assets 9,641,582 14,705,155
Net assets at beginning of period 48,605,480 33,900,325
------------ ----------
NET ASSETS at the end of the period (including
Undistributed net investment income of
$36,644 and $2,203, respectively) $58,247,062 $48,605,480
=========== ===========
* A summary of capital share transactions follows:
Six months ended
February 29, 2000 Year ended
(Unaudited) August 31, 1999
----------------- ---------------
Shares Value Shares Value
------ ----- ------ ------
Shares sold 1,470,353 $14,261,710 2,734,375 $27,937,035
Shares reinvested from
distributions 92,013 1,093,581 239,692 2,447,668
Shares redeemed (557,926) (5,392,155) (1,223,411) (12,436,668)
--------- ---------- --------- ----------
Net increase 1,004,440 $9,963,136 1,750,656 $17,948,035
========= ========== ========= ===========
See Notes to Financial Statements
<PAGE>
CSI FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------------
Six months ended
February 29, 2000 Year ended Period ended
(Unaudited) August 31, 1999 August 31, 1998*
---------------- --------------- ---------------
Per Share Operating Performance
Net asset value, beginning of period $9.75 $10.48 $10.00
------ ------ ------
Income from investment operations-
Net investment income 0.21 0.39 0.22
Net realized and unrealized gain (loss) (0.07) (0.51) 0.26
------ ------ ------
Total from investment operations 0.14 (0.12) 0.48
------ ------ ------
Less distributions-
Distributions from net investment income (0.20) (0.61) --
Distributions from capital gains -- -- --
----- ------ ------
Total distributions (0.20) (0.61) --
------ ------ ------
Net asset value, end of period $9.69 $9.75 $10.48
====== ====== ======
Total Return 1.48% (1.31%) 4.80%
====== ====== ======
Ratios/Supplemental Data
Net assets, end of period (000's) $58,247 $48,605 $33,900
Ratio to average net assets - (A)
Expenses (B) 1.50%** 1.00% 1.51%**
Expenses- net (C) 1.00%** 1.00% 1.00%**
Net investment income 4.32%** 4.22% 4.34%**
Portfolio turnover rate 2.12% 1.38% 0.00%
* Commencement of operations January 27, 1998
** Annualized
(A) Management fee waivers reduced the expense ratios and increased the net
investment income ratio by .50% for the six months ended February 29, 2000 and
.50% for the period ended August 31, 1998.
(B) Expense ratios have been increased to include custodian fees which were
offset by custodian credits and before management fee waivers.
(C) Expense ratio - net reflects the effect of the management fee waivers and
the custodian fee credits the fund received.
See Notes to Financial Statements
<PAGE>
CSI FIXED INCOME FUND
Notes to the Financial Statements
February 29, 2000 (Unaudited)
- ----------------------------------
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
The CSI Fixed Income 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 1997 as a series of TWF which has allocated to the Fund 50,000,000 of its
500,000,000 shares of $.01 par value common stock.
The objective of the Fund is to seek current income by investing in debt
securities. The Fund seeks to achieve its objective by investing in obligations
issued or guaranteed by the U.S. Government, its agencies, authorities, and
instrumentalities ("U.S. Government Securities"), municipal securities,
corporate debt securities, zero coupon bonds, as well as obligations of
governments, instrumentalities and corporations outside the U.S.
The following is a summary of significant accounting policies consistently
followed by the Fund. The policies are in conformity with generally accepted
accounting principles.
A. Security Valuation. Money market investments with a remaining maturity
of less than sixty days are valued using the amortized cost method; debt
securities are valued by appraising them at prices supplied by a pricing agent
approved by the Fund, which prices may reflect broker-dealer supplied valuations
and electronic data processing techniques.
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 Interest Income. Security transactions are
accounted for on the trade date. The cost of securities sold is determined on a
first-in, first-out basis. Interest income is recorded on the accrual basis.
D. Distribution to Shareholders. Distribution from 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 differences are primarily due to net operating losses and
post-October capital and currency losses.
E. Use of 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 AND OTHER
Pursuant to an Investment Advisory Agreement, the Advisor, CSI Capital
Management, Inc. ("CSI") provides investment services for an annual fee of 1.00%
of average daily net assets of the Fund. CSI has voluntarily agreed to waive its
fees and reimburse the fund through December 31, 2000 for expenses in order to
limit the operating expenses to 1.0% of average net assets. For the period ended
February 29, 2000, the manager waived fees of $132,245.
As provided in the Administrative Agreement, the Fund reimbursed
Commonwealth Shareholder Services, Inc. ("CSS"), its administrative agent,
$54,886 for providing shareholder services, recordkeeping, administrative
services and blue-sky filings. The Fund compensates CSS for blue-sky and certain
shareholder servicing on an hourly rate basis. For other administrative
services, CSS receives 0.20% of average daily net assets of the Fund on the
first $50 million, 0.15% per annum of the average daily net assets from $50
million to $100 million, and 0.10% per annum of the average daily net assets
over $100 million, with a minimum fee of $15,000.
Fund Services, Inc.("FSI") is the Fund's Transfer and Dividend Disbursing
Agent. FSI received $11,363 for its services for the period ended February 29,
2000.
Certain officers and/or directors of the Fund are also officers and/or
directors of CSI, CSS, and FSI.
NOTE 3-INVESTMENTS/CUSTODY
The cost of purchases and the proceeds from sales of securities other than
short-term notes aggregated $873,750 and $2,000,000, respectively.
<PAGE>
Investment Adviser:
CSI Capital Management, Inc.
445 Bush Street, 5th Floor
San Francisco, California 94108-3725
Distributor:
First Dominion Capital Corp.
1500 Forest Avenue
Suite 223
Richmond, Virginia 23229
Independent Auditors:
Tait, Weller and Baker
Eight Penn Center Plaza
Suite 800
Philadelphia, Pennsylvania 19103
Transfer Agent:
For account information, wire purchase or redemptions, call or write to CSI
Equity and CSI Fixed Income Funds' Transfer Agents:
Fund Services, Inc.
Post Office Box 26305
Richmond, Virginia 23260
(800) 628-4077 Toll Free
More Information:
For 24 hour, 7 days a week price information, and for information on any series
of The World Funds, Inc., investment plans, and other shareholder services, call
Commonwealth Shareholder Services at (800) 527-9525 Toll Free.
