Semi-Annual Report to Shareholders
SAND HILL PORTFOLIO MANAGER FUND
A Series of
The World Funds, Inc.
A "Series"Investment Company
For the Period Ended
February 29, 2000
<PAGE>
Sand Hill Portfolio Manager Fund
Schedule of Portfolio Investments
February 29, 2000 (Unaudited)
Number
of Market
Shares Security Description Value
------- -------------------- ---------
COMMON STOCK: 80.48%
CAPITAL GOODS: 4.34%
7,400 Dover Corp. $ 285,363
9,500 Johnson Controls Inc. 507,063
---------
792,426
---------
COMMUNICATION SERVICES: 5.50%
5,900 AT&T 291,681
11,550 MCI Worldcom, Inc.* 515,419
5,132 SBC Communications 195,016
---------
1,002,116
---------
CONSUMER CYCLICALS: 6.43%
25,000 Leggett & Platt, Inc. 420,312
2,400 Sony ADR 752,100
---------
1,172,412
---------
CONSUMER STAPLES: 7.12%
8,600 Newell Rubbermaid Co. 198,875
9,000 Pepsico Inc. 290,250
5,400 Procter and Gamble Co. 475,200
8,800 Whole Foods Markets* 334,125
---------
1,298,450
---------
ENERGY: 5.96%
6,100 BP Amoco ADR 286,700
4,356 Exxon Mobil Corp 328,061
8,000 Nabors Industries* 287,000
2,500 Schlumberger Ltd. 184,687
---------
1,086,448
---------
FINANCIALS: 10.36%
3,100 American International Group 274,156
7,100 Equity Residential Property Trust 283,556
9,750 HSBC Hldgs PLC ADR 580,125
9,800 MBIA Inc. 376,075
4,000 Radian Group 138,750
7,100 Wells Fargo & Co. 234,744
---------
1,887,406
---------
HEALTHCARE: 11.47%
7,400 Abbott Labs 242,350
9,400 Amgen Inc.* 640,963
10,200 Elan Corp. * 419,475
7,200 Johnson & Johnson 516,600
7,750 Schering-Plough Corp. 270,281
---------
2,089,669
---------
TECHNOLOGY: 25.45%
5,700 EMC Corp.* 678,300
11,500 Grainger (W.W.) Inc. 492,344
6,100 Intel Corp. 689,300
2,500 Microsoft Corp. * 223,438
5,600 Nortel Networks 624,400
6,600 SAP ADR 470,663
8,800 Sun Microsystems* 838,200
8,300 Sungard Data Systems* 249,000
8,400 Williams Communications 373,800
---------
4,639,445
---------
TRANSPORTATION: 1.50%
5,000 United Parcel Services 273,125
---------
UTILITIES: 2.35%
6,200 Enron Corp. 427,800
---------
TOTAL COMMON STOCKS:
(Cost: $10,256,921) 14,669,297
----------
Principal
Amount U.S. GOVERNMENT SECURITIES: 16.38%
- ----------
550,000 U.S. Treasury Bill
maturity date 03/23/00 548,313
320,000 U.S. Treasury Note
maturity date 07/31/00; 6.125% 320,200
300,000 U.S. Treasury Note
maturity date 09/30/02; 5.875% 295,031
200,000 U.S. Treasury Note
maturity date 2/15/03; 6.25% 198,000
300,000 U.S. Treasury Note
maturity date 02/15/04; 5.875% 292,312
200,000 U.S. Treasury Note
maturity date 11/15/05; 5.875% 192,500
380,000 Federal National Mortgage Association
maturity date 03/05/07; 6.66% 366,185
200,000 Federal National Mortgage Association
maturity date 05/01/08; 6.60% 188,126
200,000 Federal Home Loan Bank
maturity date 11/09/09; 6.8% 189,244
400,000 Federal Home Loan Bank
maturity date 01/28/10; 7.57% 394,750
---------
TOTAL U.S. GOVERNMENT SECURITIES: 2,984,661
(COST:$3,029,588) ---------
SHORT TERM INVESTMENT: 2.47%
450,972 Star Treasury Fund 450,972
(Cost: $450,972) ---------
TOTAL INVESTMENTS:
(Cost: $13,737,481)** 99.33% $18,104,930
Other assets, net 0.67% 121,275
------- ----------
NET ASSETS 100.00% $18,226,205
======= ==========
*Non-income producing
**Cost for Federal income tax purpose is $13,737,481 and net unrealized
appreciation consists of:
Gross unrealized appreciation $ 5,064,147
Gross unrealized depreciation (696,698)
---------
Net unrealized appreciation $ 4,367,449
=========
ADR --- Security represented is held by the custodian bank in the form of
American Depository Receipts
See Notes to Financial Statements
<PAGE>
SAND HILL PORTFOLIO MANAGER FUND
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2000 (Unaudited)
- -----------------------------------
ASSETS
Investments at value (identified cost of $13,737,481)
(Notes 1 & 3) $18,104,930
Receivables:
Dividends $ 16,719
Interest 36,341
Securities sold 192,082
Capital stock sold 99,472
--------
344,614
Deferred organization costs (Note 1) 1,182
-----------
TOTAL ASSETS 18,450,726
-----------
LIABILITIES
Investment advisory fees 14,262
Accrued expenses 11,171
Securities purchased 199,088
-----------
TOTAL LIABILITIES 224,521
-----------
NET ASSETS $18,226,205
===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE ($18,226,205 / 1,044,785 shares
outstanding) $17.45
===========
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 $13,557,049
Accumulated net investment loss (5,815)
Accumulated net realized gain 307,522
Net unrealized appreciation of
Investments 4,367,449
-----------
Net assets $18,226,205
===========
See Notes to Financial Statements
<PAGE>
SAND HILL PORTFOLIO MANAGER FUND
STATEMENT OF OPERATIONS
Six months ended February 29, 2000 (Unaudited)
- -----------------------------------------------
INVESTMENT INCOME
Interest $ 104,873
Dividend 64,047
---------
Total income $ 168,920
----------
EXPENSES
Investment advisory fees
(Note 2) 79,116
Custody fees 17,220
Recordkeeping and administrative
Services (Note 2) 15,823
Legal and audit fees 12,359
Transfer agent fees (Note 2) 11,323
Shareholder servicing and
Reports (Note 2) 5,939
Organization expense amortization 3,421
Miscellaneous 5,117
---------
Total expenses 150,318
----------
Net investment income 18,602
----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments 342,753
Net increase in unrealized appreciation 1,299,015
----------
Net gain on investments 1,641,768
----------
Net increase in net assets resulting from operations $1,660,370
==========
See Notes to Financial Statements
<PAGE>
SAND HILL PORTFOLIO MANAGER FUND
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------
Six months
ended Year
February 29, 2000 ended
(Unaudited) August 31, 1999
----------------- ---------------
OPERATIONS
Net investment income $ 18,602 $ 24,808
Net realized gain on investments 342,753 371,168
Change in unrealized appreciation of
investments 1,299,015 2,083,003
----------- -----------
Net increase in net assets resulting
from operations 1,660,370 2,478,979
----------- -----------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income ($.05 and $.07
per share, respectively) (45,386) (55,461)
Capital gains ($ -- and $.85 per share,
respectively) -- (673,457)
CAPITAL SHARE TRANSACTIONS
Net increase in net assets resulting
from capital share transactions* 2,421,006 2,070,111
----------- -----------
Net increase in net assets 4,035,990 3,820,172
Net assets at beginning of period 14,190,066 10,369,894
----------- -----------
NET ASSETS at the end of the period
(including undistributed net
investment income of $0 and $20,820,
respectively) $18,226,056 $14,190,066
=========== ===========
* A summary of capital share transactions follows:
Six months ended
February 29, 2000 Period ended
(Unaudited) August 31, 1998
----------------- ----------------
Shares Value Shares Value
------- --------- ------- ----------
Shares sold 177,590 $2,994,439 160,793 $2,448,547
Shares reinvested from
Distributions 2,579 44,747 48,380 692,324
Shares redeemed (37,288) (618,180) (70,273) (1,070,760)
------- --------- ------- ----------
Net increase 142,881 $2,421,006 138,900 $2,070,111
======= ========== ======= ==========
See Notes to Financial Statements
<PAGE>
SAND HILL PORTFOLIO MANAGER FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ----------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Six months ended Year Years ended Jan. 2, 1995*
February 29,2000 ended Period ended December 31, to
(Unaudited) August 31, 1999 August 31, 1988 1997 1996 Dec. 31, 1995
---------------- --------------- --------------- -------------- -------------
Per Share Operating Performance
Net asset value, beginning of period $ 15.73 $ 13.59 $ 14.57 $ 12.79 $ 11.11 $ 10.00
Income from investment operations- ------- ------- ------- ------- ------- -------
Net investment income 0.02 0.02 0.06 0.09 0.14 0.06
Net realized and unrealized gains 1.75 3.04 (1.04) 2.20 2.02 1.10
------- ------- ------- ------- ------- -------
Total from investment 1.77 3.06 (0.98) 2.29 2.16 1.16
Less distributions- ------- ------- ------- ------- ------- -------
Distributions from net investment
Income (0.05) (0.07) -- (0.08) (0.15) (0.05)
Distributions from realized gains -- (0.85) -- (0.43) (0.33) --
------- ------- ------- ------- ------- -------
Total distributions (0.05) (0.92) -- (0.53) (0.48) (0.05)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 17.45 $ 15.73 $ 13.59 $ 14.57 $ 12.79 $ 11.11
======= ======= ======= ======= ======= =======
Total Return 1 11.24% 23.22% (6.73%) 17.87% 19.57% 11.60%
======= ======= ======= ======= ======= =======
Ratios/Supplemental Data
Net assets, end of period (000's) $18,226 $14,190 $10,370 $10,566 $ 6,459 $ 4,025
Ratio to average net assets - (A)
Expenses (B) 1.90%** 2.05% 2.08%** 2.08% 2.50% 3.03%**
Expense ratio - net (C) 1.90%** 1.90% 1.86%** 1.90% 2.00% 1.90%
Net investment income 0.23%** 0.19% 0.62%** 0.71% 1.29% 0.52%
Portfolio turnover rate 29.48% 39.17% 30.19% 16.48% 32.97% 40.96%
</TABLE>
- -------------
* 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 have 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>
Sand Hill Portfolio Manager Fund
Notes to the Financial Statements
February 29, 2000 (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,
$18,608 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 $11,323 for its services for the year ended
February 29, 2000.
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 proceeds from sales of securities other than
short-term notes for the period ended February 29, 2000, were $6,632,690 and
$4,407,339 respectively.
<PAGE>
Investment Adviser:
Sand Hill Advisors, Inc.
3000 Sand Hill Road
Building Three, suite 150
Menlo Park, California 94025-7111
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 Sand
Hill's Transfer Agent:
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.
